3 Things to Watch for in the Stock Market This Week

yestocks rose last week as both the Dow Jones Industrial Average (DJINDICES: ^ DJI) and the S&P 500 (SNPINDEX: ^GSPC) climbed higher after jumping the previous week.

Earnings season picks up a bit over the next week, and then we’ll see some highly anticipated reports on the way. Let’s take a closer look at what Lululemon Athletica (NASDAQ: LULU), Tough (New York Stock Exchange: YOU)and McCormick (New York Stock Exchange: MKC) might have to tell investors.

1. Lululemon Christmas Sales

There are some big questions ahead of Lululemon’s holiday season earnings report on Tuesday. The latest announcement from the sportswear specialist, in early December, showed impressive momentum at the start of the fourth quarter. Sales jumped 30% through the end of October exceed management’s short-term outlook. The company also raised its full-year 2021 forecast.

However, executives changed their minds about a month later, after the rise of the omicron variant collided with staffing challenges and supply chain issues to pressure results. Lululemon’s new outlook calls for both sales and earnings to land at the lower end of its December guidance.

“We start the Christmas season in [a] strong position, but since then I have experienced various fallout from the omicron variant,” CEO Calvin McDonald said on January 10.

A couple practicing yoga at home.

Image source: Getty Images.

This week’s report will reveal those exact consequences, which could manifest in slower sales gains and declining profit margins. Keep an eye on Lululemon inventory for signs that supply chain challenges will pressure sales in early 2022.

2. Chewy’s market share

Pet product e-commerce retailer Chewy is likely to report strong sales growth in its Tuesday announcement. Most investors expect revenue gains to decline a bit to 19%, compared to 24% last quarter. The chain could show a worsening of profitability due to the increase in transport costs.

A large portion of Chewy’s sales come from customers who are engaged with their autoship program that acts as a subscription service. That setup should help protect the retailer’s market share even as people return to shopping in person as the threat of the pandemic subsides.

On the other hand, staffing challenges are a threat to the business, especially as employees demand higher wages in this tight job market. Chewy also has to deal with supply chain issues even as it invests more in its shipping platform. Look for executives who mention those necessary investments as they project weaker earnings growth in 2022.

3. McCormick margins

McCormick announces his latest operating results on Tuesday in a report that will be packed with valuable news for investors. The spices and flavors giant is kicking off its 2022 fiscal year after posting a solid 11% revenue increase in 2021, with earnings more or less balanced between its consumer segment and its restaurant division.

Management is projecting a modest slowdown going forward, with earnings landing around 5% after accounting for exchange rate swings. That forecast could change slightly on Tuesday to account for sales disruptions in parts of Europe and supply chain challenges in the US market.

But McCormick’s long-term outlook is bright thanks to the potential for growth outpacing the market along with increased profitability as your sales shift toward higher-margin products like hot sauces and condiments. Combine those boosts with a steadily rising dividend, and you have some good reasons to consider owning this stock, even in a tougher retail environment in 2022.

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Demitri Kalogeropoulos has no position in any of the mentioned stocks. The Motley Fool owns and recommends Chewy and Lululemon Athletica. The Motley Fool recommends McCormick. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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