Over the past couple of years, clothing and electronics haven’t exactly been a big priority for shoppers, trying to cover higher-priced groceries and gasoline. In the coming week, results from retail chains such as Macy’s Inc., Urban Outfitters Inc., TJX Cos. and Best Buy Co. will offer an update on whether consumer appetites will become more discretionary this year.
Caution still prevails on Wall Street, despite the growth in spending for the Christmas holidays. They cited fluctuations in mall traffic, warmer winter weather, a struggling younger consumer and difficulties staying relevant in fashion. Expectations were high for off-price retailers, some analysts said.
Macy’s M,
reports results Tuesday, amid leadership changes and shareholder drama.
The department store last month rejected a takeover offer from Arkhouse Management and Brigade Capital. However, May’s management has said she is “open to opportunities” to serve shareholders and this month she received board appointments from Arkhouse and the retailer may consider offers elsewhere. Tony Spring became Macy’s new CEO this month, and before that, the company said it would cut corporate staff and close a handful of stores.
Meanwhile, TD Cowen analyst Oliver Chen, in a research note this month, said he was “cautious” about Macy’s approach to the results. He cited “challenging mall traffic trends and ongoing assortment for private label brands.”
Urban Outfitters URBN,
also reports Tuesday, as younger customers of the namesake brand struggle with higher prices and remain somewhat uninspired by that chain’s clothing assortment. However, the company named a new president of Urban Outfitters North America stores and said it saw increased sales over the holiday period.
However, that leap was led by Free People and Anthropologie stores, which cater to a more affluent consumer. And analysts at Jefferies said in January that “as UO’s largest customer remains struggling and the brand attempts to resonate with its customer base, we remain cautious as the brand attempts to return to revenue growth.”
TJX TJX discounted chain,
the parent of TJ Maxx and Marshalls, reports Wednesday. With commodity prices elevated, analysts at William Blair this month said TJX will benefit from a year of “migration away from discount department stores” amid broader challenges for department stores looking to split the difference between luxury shopping and bargain hunting.
But they also noted a yearlong rally in the company’s shares, and said many investors have “hid out” in shares of off-price chains over the past two years amid stormy inflation and recession worries. Stronger results from retail chains that don’t discount as much could prompt investors to flee off-price names and chase bigger gains elsewhere, they suggested.
Then there is the demand for electronics, which is also weak. Comment from executives at electronics retailer Best Buy BBY,
which reports Thursday, will come as some analysts say a recovery is likely, as people replace old phones, laptops and other devices.
“Later in 2024, the industry should begin to benefit from the natural cycles of upgrading and replacing technology purchased at the onset of the COVID-19 pandemic,” Wedbush analysts said in a January note.
These retailers will report after Walmart Inc., during its earnings conference call last week, said prices for general goods, meaning things like clothing and electronics, were lower than a year ago and, in some cases, two years ago. While this is good for customers, it is bad for retailers’ sales and profits.
This week in earnings
Elsewhere, smart TV maker Vizio Holding Corp. VZIO,
will report results, after Walmart said it would buy the company in an effort to bring more digital ads to people in more places. Profits are also due to the theater chain and meme stock AMC Entertainment Holdings AMC,
Domino’s Pizza Inc. DPZ pizza chains,
and Papa John’s International Inc. PZZA,
also report. Dell Technologies Inc. DELL,
home improvement retailer Lowe’s Cos. LOW,
and eBay Inc. EBAY,
also report.
The call to put on the agenda
Fundamental: Entertainment and streaming giant Paramount Global PARA,
will release the results on Wednesday. These findings will come as the streaming industry retreats from its massive spending push on programming in the previous decade, with implications for the types of shows and movies that ultimately get made.
They will also come as Paramount reportedly undertakes multiple merger and acquisition offers amid the streaming industry’s ongoing consolidation and investor agitation for profit growth. However, Barron’s reported this month that the company – which oversees Paramount Pictures, CBS and Comedy Central – will cut jobs in an effort to cut costs and boost profits. Those cuts, Barron said, would come after what CEO Bob Bakish called a “successful” Super Bowl, which aired this month on CBS, the company’s Paramount+ streaming service, and Nickelodeon.
Paramount’s shares have fallen in the last 12 months and that of Warren Buffett’s Berkshire Hathaway Inc. BRK.A,
recently reduced its stake in the company. And elsewhere in the entertainment industry, rival Warner Bros. Discovery Inc. WBD,
reported deeper losses than expected, including in the streaming sector.
The numbers to keep an eye on
Cloud services require: CRM by Salesforce Inc.,
Snowflake Inc. SNOW,
Okta Inc.OKTA,
and Workday Inc. WDAY,
report results during the week. Taken together, the findings will shed more light on employers’ technology budgets and demand for AI.