Dismal Earnings Point to Consumer Preference for Discount Goods
Last week, the consumer price index proved that inflation is heating up and retailers
are starting to raise prices. With the exception of warehouse clubs and off-price
retailers including BJ’s Wholesale Club
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retail earnings this week are likely to be dismal, but may be better than some
analysts expect. Gap Inc.
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evidence that consumers are flocking to discount stores such as Wal-Mart Stores
Inc.
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is expected to report a 5% drop in quarterly sales.
Besides retailers, this week will offer up a number of technology, computer
and internet companies. But Monday and Tuesday will bring the two largest home-improvement
chains.
On Monday, get set to hear from Lowe’s Companies Inc.
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PowerRating) before
the bell. The second-largest home improvement reports quarterly results one
day ahead of larger rival Home Depot
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PowerRating). Lowe’s is expected to report
second-quarter earnings of $0.56 per share on revenue of $14.1 billion, according
to Reuters Estimates. If you’re short, you may want to cover at the start
of the regular session as this stock has a tendency to narrow its pre-market
moves in the regular session, doing so in four of the last seven quarters we’ve
tracked. On May 19, 2008, Lowe’s fell 3.6% in pre-market trade after the
company’s first-quarter earnings beat by a penny a share and revenue missed.
It narrowed its losses in that day’s regular session, closing with a 2.6%
decline.
On Tuesday, Hewlett-Packard Co.
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In the near-term, H-P has narrowed three out of the past four quarters between
the after-hours and next day regular session after an earnings event. In the
long-term, H-P is split between widening and narrowing its share move between
the after-hours and next day regular session after an earnings event. It has
moved more aggressively in the same direction the next day in ten of 17 quarters.
On May 20, 2008, H-P fell 0.5% in after-hours trading after topping estimates
and guiding in-line with the Street. It widened its losses the following regular
session, closing down 3.6%.
On Wednesday,
Salesforce.com, Inc.
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PowerRating) reports after the close of trading.
This is a stock that likes to reverse between sessions. Shares just favor a
narrowing trend between the bells following its after-hours earnings reports,
narrowing or reversing eight times and widening six times in next-day trade
following its last 14 extended-hours earnings reports. In the near-term, the
stock has reversed three out of the past four quarter. On May 21, 2008, Salesforce.com
fell 0.6% in after-hours trading after its first-quarter results beat the Street.
It reversed course the following day, ending higher by 5.8%.
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