Investors eye upcoming reports after rally in US retailer stocks

New York

RECENT gains in US retailer shares could be put to the test in the coming days as top companies in the sector report quarterly results and investors hunt for clues about how well they have managed supply chain problems.

Retail companies have had a strong run so far in November, with the S&P 500 retailing exchange-traded fund up about 9 per cent compared with a roughly 2 per cent gain for the S&P 500.

That has roughly coincided with upbeat signs as the world opens up after the global pandemic and looks to new treatments such as Covid-19 antiviral pills to keep new infections in check.

The third-quarter earnings season is in the final stretch, with less than 10 per cent of the companies in the S&P 500 yet to report.

A big chunk of those will be retailers, with results due as early as Tuesday (Nov 16) from Walmart and Home Depot, while Target, Macy's and Kohl's are expected later in the week.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

US retail sales data for October is also due this week.

But whether retailers can sustain recent gains could depend on how well they have managed the global supply chain crisis, which has raised additional concerns about the critical holiday shopping period.

"Traditionally, you want to be long retail going into Black Friday," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, referring to the day after the US Thanksgiving holiday that unofficially marks the start of the holiday shopping season.

"That said, there are significant supply chain unknowns," he added. "Who managed to do well in spite of the supply chain challenges? That's the biggest question that's going to be answered by each individual company."

While reports need to be examined individually, investors are going to want to see increased guidance from companies with strong recent gains, James said. "Any whiff of disappointment is not being treated well," he noted.

Of the S&P 500 companies who have reported, about 80 per cent have beaten analysts' expectations, and the forecast for year-on-year third quarter earnings growth is now at 41.5 per cent, up from the 29.4 per cent seen at the beginning of October, according to IBES data from Refinitiv. REUTERS