Wal-Mart Holiday Signals:


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Nov. 9, 2012, 4:32 p.m. EST

Wal-Mart, Home Depot may offer holiday signals

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By Andria Cheng, MarketWatch

NEW YORK (MarketWatch) — Dow components Wal-Mart Stores Inc. and Home Depot Inc. are expected to headline a parade of retail earnings next week, with investors looking for clues about the state of consumers heading into the crucial fourth-quarter holiday season.

For the third quarter, Home Depot HD +0.16% , is estimated to see profit rising to 70 cents a share from 60 cents in the same period a year earlier, with sales increasing to $17.9 billion from $17.3 billion, FactSet data showed. Its smaller rival Lowe’s Cos. LOW -1.96% is expected to have flat per-share profit growth with sales increasing to $11.91 billion from $11.85 billion, according to FactSet. See Sandy’s retail impact.

See a reporter’s personal account of Sandy: Life in a city of darkness.

Home Depot reports on Tuesday. Lowe’s on Nov. 19. Both companies are expected to see some sales lift in the third quarter from shoppers getting ready for superstorm Sandy, analysts said, adding the lift would continue in the fourth quarter with repair and rebuilding work from the storm, which caused widespread damage in New York, New Jersey and other areas of the East Coast.

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Wal-Mart moves up holiday sale

Wal-Mart fired an early shot in the holiday-buying wars, saying it will move up the start of its holiday-specials season to 8 p.m. on Thanksgiving Day, reports MarketWatch’s Andria Cheng. Pjoto: AP

“The focus will be on the outlook for demand, inventories, line reviews, promotional plans (particularly in appliances around Black Friday),” said Raymond James analyst Budd Bugatch.

For Wal-Mart WMT -0.23% and Target TGT +0.32% , both of which report on Thursday, some analysts said attention will be on what the discount chains have in store for the holiday season, with little expectation for them to raise full-year outlooks. Wal-Mart is expected to see profit rising to $1.07 a share from 97 cents a share with sales increasing to $114.4 billion from $109.5 billion, FactSet data showed.

Target is expected to see profit declining to 78 cents a share from 82 cents a share with sales rising to $16.6 billion from $16.4 billion, FactSet data showed.

“We expect a heavily promotional holiday season (with Wal-Mart sounding the most aggressive), and we sense Target will stay disciplined and like last year, may not chase the discounts of others,” said Morgan Stanley analyst Mark Wiltamuth. “We like (Target) shares as a value idea heading into 2013 as valuation could expand on investor enthusiasm over the Target Canada launch in March/April. We believe (Wal-Mart) will need to see a U.S. (same-store sales) acceleration or (per-share profit) upside to keep the shares moving.”

Other retailers on tap next week include T.J. Maxx parent TJX Cos. TJX +0.92% and luxury retailer Saks Inc. SKS +0.50% on Tuesday; Office supplies chain Staples Inc. SPLS -1.24% and teen retailer Abercrombie & Fitch ANF +0.06% on Wednesday; clothing chain Gap Inc. GPS -1.32% and Kmart parent Sears Holdings Corp. SHLD +1.08% on Thursday and athletic-shoe retailer Foot Locker Inc. FL +1.43% on Friday.

Electronics retailer Best Buy BBY +0.26% is hosting an analyst meeting in New York on Tuesday.

JCP 20.64, -1.05, -4.84%

J.C. Penney Co. Inc.

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So far, despite mixed results and outlooks from those that have reported, the retail sector is looking to fare better than the other market segments. While J.C. Penney Co.’s JCP -4.84% big disappointing loss on Friday took 1.7 percentage points off a third-quarter average estimated profit growth of 6.9% for 120 retailers tracked by Retail Metrics, the segment’s growth still outpaces the 0.2% estimated average decline of the S&P 500 components, Retail Metrics data showed. Time to warm up to J.C. Penney yet?

Among about 50 retailers that have reported their results, 60% have beaten Wall Street expectations while 28% have missed.

“While we are still early in the third quarter earnings season, it’s a bit disconcerting that the percentage of retailers beating expectations is at just 60%, below the long-term average of 61%,” said Ken Perkins of Retail Metrics, adding the 28% that missed was also above the long-term trend of 19% that fell short. “This is especially so given the strength of back to school sales.”

Another 12% of retailers that reported met estimates.

Implied or actual fourth-quarter outlooks from chains such as Macy’s Inc. M -0.21% and Kohl’s Corp. KSS +0.21% have been less stellar than expected. The holiday quarter outlook has been overshadowed by how Hurricane Sandy that led to store closings in the early part of November will hurt sales during the quarter and whether retailers will be able to make up for all of them.

Meanwhile, while cost control and other initiatives have been able to help Office Depot ODP +3.62% and OfficeMax OMX -0.38% offset declining demand and deliver upside in bottom-line results, the still high unemployment rate and the pending fiscal cliff issue remain an overhang over consumer spending heading into the holiday season, analysts said. Office supplies chains revamp amid lower sales.

Reuters Enlarge Image

Black Friday shoppers in Charlotte, N.C., in 2011.

So far, retailers are looking to be aggressive in unveiling their holiday promotions and plans early to engage consumers. Wal-Mart this week said that it’s unleashing its Black Friday promotions two hours earlier this year at 8 p.m. on Thanksgiving while Sears will open its namesake chain at 8 p.m. on Thanksgiving also, compared with at 4 a.m. on Black Friday last year. Wal-Mart has also said it’ll be aggressive this year in adding marketing and cutting prices in gaining a price edge against its competition. How retailers are getting your holiday attention

Retailers also are trying to turn the increased mobile device use into their advantage. J.C. Penney is featuring free Wi-Fi in its stores and using mobile devices to check out consumers. Against increased online competition, Target and Best Buy have said they are offering price matching guarantee against select online rivals.

Andria Cheng is a MarketWatch reporter based in New York.