Earnings Preview: Home Depot Inc (HD), Target Corporation (TGT), JC Penney Company Inc. (JCP)

With more than 430 companies of the Standard & Poor's 500 done reporting their fourth-quarter and full-year results, the spotlight is now turning toward big retailers. By the end of the week, we’ll know how nearly all the major names in the world of U.S. department stores and general merchandisers fared this past (and disappointing) holiday season.

So far, the signs aren’t pointing toward a stellar performance.

Last Thursday, both Wal-Mart Stores, which banks on low-income shoppers, and fashion specialty retailer Nordstrom, which caters to the well-heeled, reported lackluster earnings for the fourth quarter. Next week, we’ll see if other big names fared as poorly, including home improvement majors Home Depot and Lowe’s, struggling department stores JC Penney and Sears, and Wal-Mart rival Target.

“There’s no question that traffic was off in the fourth quarter for retailers big and small,” said Bob Phibbs, CEO of the Retail Doctor, a consulting firm based in New York. “They all like to paint the rosy picture that it’s about the cold weather, but at the end of the day, there are just too many places to buy the same stuff. There’s a lot of ‘average’ out there.”

Retail sales matter because the consumer drives about two-thirds of U.S. economic growth. The consumer discretionary sector, which includes big retailers, is one of the best performing S&P sectors in the current weak fourth-quarter reporting season, behind telecommunications and ahead of healthcare. But next week, as more big retailers report, consumer discretionary spending likely will fall to third place.

“Consumer discretionary [spending] will be a key sector to watch as fourth-quarter earnings season winds down, since it is once again among the leaders,” Lindsey Bell, senior analyst for S&P Global Intelligence, said in a note to investors Thursday.

Overall, out of the 431 S&P companies that had reported as of Friday, earnings growth declined by 4.75 percent. Excluding energy and materials stocks, which have been hammered hard in the past year, per-share earnings have grown by a tepid 1.8 percent compared to the fourth quarter of 2014.

Phibbs says the best retail performers have been the smaller ones, such as Lululemon Athletica Inc. (NASDAQ:LULU) and Under Armour Inc. (NYSE:UA), who know their customers and have figured out how to turn them from browsers into buyers without sacrificing profits through promotions.

“These smaller retailers have a clear focus about who they are, who their customers are and how to get them to buy at full price,” Phibbs said. “You go to the mall these days, and you see everything is discounted. Is there a day the Gap or Abercrombie isn’t offering something at a discount? How long can that last?”

Below is a rundown of reports of select retailers due out next week, with estimates provided by analysts polled by Thomson Reuters and stock-price movements based on market-closing levels Friday. Retailers' quarters tend to end in January so they can include the full holiday season.

TUESDAY

In January, Dollar Tree Inc. (NASDAQ:DLTR) CEO Howard Levine announced he was stepping down after completing the integration of Family Dollar, which Dollar Tree acquired last year in a $9.1 billion deal that brought together two of the biggest deep-discount store chains. The Virginia-based company has reported 31 consecutive quarters of sales growth. Analysts have pointed out recently the company may benefit from Wal-Mart’s recent announcement that it’s closing all of its smaller Walmart Express stores, just as low-income shoppers have increased traffic at discounters. Levine’s exit, however, was unexpected; the son of the company’s founder was initially expected to stay on for two years after the Dollar Tree acquisition.

Dollar Tree Inc. is scheduled to report Tuesday morning before markets open in New York. Analysts expect it to report $245.9 million in net profit, or $1.04 per share, for the quarter, compared to $206.6 million and $1 per share in the same year-ago period. Excluding one-time items, net profit is expected to be $251.2 million or $1.07 per share. Revenue is expected to rise to $5.41 billion from $2.45 billion. The steep jump is related to Dollar Tree-Dollar General deal initiated in August 2014 and completed last summer.

Dollar Tree stock is trading around $78 and has gained about 2.3 percent in the past 12 months and about 1.6 percent since the start of the year.

Home Depot Inc. (NYSE:HD) is likely to be one of the few shining beacons this earnings season. Analysts expect solid performance from the world’s largest home-improvement retailer but will look to see what the company says about its 2016 prospects. Like its rival Lowe’s, Home Depot’s performance tends to track closely with U.S. new-residential construction and home purchasing.

Home Depot will report Tuesday before markets open. The company is expected to report net profit of $1.39 billion, or $1.11 per share, in its three months ending in January compared to $1.38 billion or $1.05 per share in the same period of the previous year. Revenue is expected to rise to $20.39 billion from $19.16 billion.

Stock in the Atlanta-based company is trading around $121 and has gained 9 percent over the past 12 months and lost about 9 percent since the start of the year.

Macy's Inc. (NYSE:M) is trying to be cool. The Cincinnati-based department store chain recently inked a deal with snowboarding champion Shaun White aimed at amping up its menswear line this summer. It’s part of a larger trend in the sector to provide brick-and-mortar stores a unique edge that distinguishes it from rivals — and especially from the threat from online retail behemoth Amazon.com. Meanwhile, the company’s performance is weak, and it recently announced it was slashing 4,000 jobs and closing 40 stores in the coming months.

Macy's will report Tuesday before markets open. For the three months ending in January, the company is forecast to report a net profit of $635.3 million, or $1.87 per share, compared to $793 million or $2.26 per share. Adjusted for one-time charges, Macy’s is seen reporting $588.1 million in profit and $1.87 per share. Revenue is expected to drop to $8.83 billion from $9.36 billion in the year-ago period.

Macy’s stock is trading at around $40 and has lost about 36 percent of its value over the past 12 months, though it has gained about 14 percent since the start of the year.

Office Depot Inc. (NASDAQ:ODP) is currently the target of a takeover bid from its larger rival, Staples Inc. (NASDAQ:SPLS), which would bring together the first- and second-largest office supply retailers. Earlier this month, the European Commission approved the merger after Office Depot agreed to spin off some assets to ease anti-trust concerns. The two companies will also spin off some U.S. corporate contracts in an effort to reverse the U.S. Federal Trade Commission rejection of the proposal, and a courtroom battle is still on the table. The companies have agreed to keep the merger talks in place until May 16. Staples reports its fourth-quarter earnings May 4.

The Florida-based office supplies chain will report Tuesday before markets open. The company is expected to report in the three months ending January $49.9 million, or 11 cents per share, compared to a loss of $84 million and 15 cents per share. Adjusted for one-time charges, the company is seen reporting $59 million and 11 cents per share. Revenue is forecast to drop to $1.44 billion from $1.54 billion.

Shares in Office Depot are prices at around $5 and have lost about 2 percent over the past 12 months and about 8 percent since the start of the year.

WEDNESDAY

Earlier this month, Lowe's Companies Inc. (NYSE:LOW) announced it was buying Rona Inc., a Canadian distributor of hardware and building materials in a $2.3 billion bid to enter the Quebec market. The deal is aimed at boosting Canadian business for Home Depot’s main but smaller North Carolina-based rival. The company says the deal will improve earnings a year after the deal is closed, but for the time being, Lowe’s is benefiting from an improved U.S. housing market.

Lowe's will report Wednesday before the opening bell. The company is forecast to report a net profit of $545.1 million, or 60 cents per share, compared to $450 million or 46 cents per share in the year-ago period. Revenue is seen growing to $13.1 billion from $12.5 billion.

Lowe’s stock is priced around $67 and has shed about 6 percent of its value over the past 12 months and about 11 percent since the start of the year.

Despite frustrating some customers during the last Cyber Monday sales event, Target Corporation (NYSE:TGT) is coming off record online sales traffic during this past holiday season. Like its main rival Wal-Mart, Target is investing heavily in expanding its online sales to face off against juggernaut Amazon.com. The Minnesota-based discount chain also recently sold its pharmacy business to CVS Health, which will run the more than 1,600 outlets inside Target outlets.

Target will report Wednesday before markets open. The company is expected to report net profit of $948.5 million, or $1.62 per share, up from a losses of $2.6 billion and $4.10 per share in the same year-ago period. The huge loss in the year-ago quarter was related to discontinuing its Canadian operations. Excluding one-time items, Target is expected to earn $954.3 million or $1.54 per share compared to $967 million, or $1.50 per share. Revenue is expected to grow to $22.06 billion from $21.75 billion.

Target’s stock is trading at around $72 and has lost about 6 percent over the past 12 months and about 1 percent since the start of the year.

Like others in the off-price retail sector, TJX Companies Inc. (NYSE:TJX) is well-positioned for 2016. The Massachusetts-based owner of T.J. Maxx and Marshall's is benefiting as more upscale retailers like Macy’s and Nordstrom flounder. The retailer buys unsold merchandise from these more upscale rivals at the end of each shopping season and then sells them at a lower price. Traditional department stores are currently struggling with volatile fashion trends that are tipping them into promotional sales battles to lure customers. Meanwhile TJX and its rival, Ross Stores, are growing market share.

TJX will report Wednesday morning. The company is forecast to report net profit for the fourth quarter of $636.4 million, or 94 cents per share, compared to $648.2 million, or 93 cents per share, from the same three months of the previous year. Revenue is expected to rise to $8.73 billion from $8.3 billion.

TJX shares are priced around $72. The stock price has gained about 5 percent over the past 12 months and about 1 percent since the start of the year.

THURSDAY

Amid a yearslong effort that began in 2012 to reinvent itself, Best Buy Co. Inc. (NYSE:BBY) is being broadsided by sluggish growth in U.S. mobile and computer sales. The world’s largest brick-and-mortar electronics and home appliances retailer reported lower sales this past holiday season and is currently in a price war with Amazon.com over one bright spot in consumer electronics: large flat-screen televisions. On brighter side, Best Buy’s strategy of incorporating brand-specific sections and investments in specialized floor associates has helped grow sales in health products, home appliances and wearable devices.

Best Buy will report Thursday before markets open. The company is expected to report net profit of $476.3 million, or $1.38 per share, compared to $519 million, or $1.46 per share. Adjusted for one-time charges, earning per share is forecast to be $1.40 per share. Revenue is expected to be $13.61 billion, down from $14.21 billion in the year-ago period.

Shares in the Minnesota-based company are priced around $30 and have lost about a fourth of their value over the past 12 months and 3 percent since the start of the year.

Illinois-based Sears Holdings Corp. (NASDAQ:SHLD) is in trouble. Sales for both Sears and Kmart department stores are dropping so fast that the company has quietly sped up closing stores in an effort to quench a cash burn. The company is losing so much money that it will need to take on more debt to remain viable, according to Evercore ISI, one of the few industry analytics firms still following the company. Sears revenue is a fraction of what it was 10 years ago, and it keeps losing money. Could 2016 mark the end of the 130-year-old department store operator?

Sears Holdings will report before markets open Thursday. The company is expected to report fourth-quarter losses of $108.1 million, or $4.50 per share, compared to losses of $159 million or $1.50 per share. Adjusted for one-time charges, the net loss is forecast to be $478.8 million and $1.36 per share. The revenue forecast is also grim, expected to fall to $7.26 billion from $8.01 billion.

Sears Holdings stock is trading at around $17 and has lost about 54 percent over the past 12 months and about 19 percent since the start of the year.

Gap Inc. (NYSE:GPS) now has an Old Navy problem. For more than a year, the San Francisco-based apparel retailer has been relying on its budget fashion brand to offset sluggishness in Banana Republic and its namesake flagship. But grim recent sales numbers show the rise of interest in fast-apparel retailers like Uniqlo and H&M is starting to adversely affect Old Navy just as it lost its boss Stefan Larsson — widely credited with making Old Navy cool again — to Ralph Lauren. Expect to hear a lot of talk from CEO Art Peck later this week about what he’s doing to fix his company.

Gap will report Thursday after markets close. The company is expected to report net profit for the three months ending in January of $226.8 million, or 55 cents per share, compared to $319 million, or 75 cents per share in the same year-ago period. Revenue is expected to fall to $4.46 billion from $4.71 billion.

Gap stock is trading at around $26 and has lost 36 percent over the past 12 months and gained 6 percent since the start of the year.

FRIDAY

J.C. Penney Company Inc. (NYSE:JCP) is often included when talking about the challenges Sears is facing. But as far as cash flow is concerned, the Texas-based department store chain is not doing as badly and there’s no death watch for the 113-year-old department store chain. It closed more than 70 stores since 2014 and laid off thousands of people in the wake of a failed attempt to forego promotions, which alienated the company’s core customer base. Since returning to promotional sales and shifting focus back on “the modern American mom” sales have picked up significantly. It recently announced it would stock home appliances to tap in on an improving U.S. housing market and already a related pilot program running in three stores.

J.C. Penney will report Friday before markets open. The company is forecast to report for the three months ending in January net income of $62.4 million, or 21 cents per share, up from a net loss of $59 million and 19 cents per share. Adjusted for one-time charges the company is seen reporting earnings of 23 cents per share. Revenue is seen jumping to $4 billion from $2.67 billion.

The company’s stock is trading at around $7 and has lost about 10 percent of its value over the past 12 months and gained about 10 percent since the start of the year.