The internet era has unleashed a secondary revolution in the form of online retailers that have changed the way consumers check out, price and then make their purchases of goods that are as different as artificial flowers are to Zen gardens.
More than 70% of the companies making up the S&P 500 index (SPX) have already reported their quarterly earnings for the period ending in the first half of the year. Investors have been extremely critical, with good earnings reports very often not enough to stop shares from plunging on negative or even perceived negative investor sentiment.
Media stocks took a beating on the perception that the streaming service providers are going to grab a large of business from cable TV companies such as Disney and Viacom.
The treatment dished out to Apple stocks by investors, again as a result of the perception that Apple Watch sales have not taken off as expected and fears of a slide in sales of the new iPhone in China, has been exceptionally harsh by any standards.
The retailers that will be reporting in this week do so in the knowledge that an increase in the earnings per share, an increase in revenue and beating last year’s figures as well as analyst consensus forecasts, is no longer enough to ensure investor support. Reports need to be very clear about the continuing strength and ability to deliver profits into the future in order to satisfy a very selective investor community.
Far more attention is being given to what the company executives have to say about the period on which they are reporting as well as the guidance for the rest of the trading year in formulating investor sentiment that will indicate confidence in the reporting company going forward.
According to a survey published by Insider Monkey on October 9 2014, the five biggest online retailers are a bit surprising. Leading the pack, as expected, is Chinese e-Commerce giant Alibaba.com followed by Amazon.com, another e-Commerce company, while the next three slots of the five are surprising. Coming in at third spot is Apple followed by office supply chain store, Staples and in fifth spot is Wal-Mart. The last three are all traditional physical store operators that have adapted to online sales in order to maintain sales numbers and they are obviously succeeding with this new business model.
Amazon and Apple have already reported while Alibaba, Wal-Mart and Staples still have to do so. The Apple share price plunge has been quite dramatic since the company reported while Amazon started a mini slide on Friday, falling from a Thursday high of $540.90 to close on Friday at $522.62.
Among the retailers due to report earnings this week are Nordstrom Inc., Macy’s Inc., Advance Auto Parts, J.C. Penney Co. and Alibaba while consumer dependent companies, such as food manufacturer Kraft Heinz and clothing and accessory maker Fossil Group, have their fortunes very much linked to the fate of the retailers they supply.
Meanwhile, the Dow Jones Industrial Average (DJIA) has had its longest losing streak since the debt ceiling crisis hit stocks in 2011 and fell by 1.8% during the past week. Also, the S&P 500 index (SPX) also finished 1.3% lower on the week while the Nasdaq Composite (COMP) dropped by 1.7%.
The July 2015 CPI data is due for release on 19 August and this might well bear relevance to this week’s reports. All eyes will be on the retailers who are reporting this week while market reaction after the event should be most illuminating.