As investors await upcoming earnings reports, the performance of key players within the Retail-Wholesale sector could impact market sentiment in the coming weeks. This reporting cycle provides valuable insight into sector performance, with expectations for a potential uptick in both sales and earnings. These results are likely to be influenced by prevailing consumer sentiment, spending trends and the ongoing challenge of managing operational costs.

Per the latest Zacks Earnings Outlook, the sector is anticipated to witness top-line growth of 5.3% year over year in the third quarter of 2024. This follows a 4.4% increase in the preceding season. Meanwhile, the bottom line is expected to increase 12% this earnings season. The sector registered earnings growth of 16.1% in the previous reporting cycle.

With earnings season on its last leg, it is worth investing in companies with earnings beat potential. We have identified four stocks — Abercrombie & Fitch Co. ANF, Urban Outfitters, Inc. URBN, Casey's General Stores, Inc. CASY and Dollar Tree, Inc. DLTR — that are poised to trump earnings estimates this season.

See the Zacks Earnings Calendar to stay ahead of market-making news.

Key Factors Likely to Influence Retail Earnings

Retail earnings this season are poised to reflect evolving consumer preferences, which have increasingly shifted toward essentials and value-based products amid underlying inflationary pressures. Retailers focusing on competitive pricing and product diversification, particularly in areas like groceries and home essentials, may have experienced higher foot traffic and better conversion rates. However, discretionary categories such as apparel and electronics could have faced headwinds as consumers prioritize necessities.

Persistent inflation, while moderating, continues to weigh on consumer budgets and retailers’ cost structures. Retailers implementing strategic pricing, including promotions and private label expansions, are better positioned to maintain their market share without significantly eroding margins. Those with robust supply-chain management and the ability to pass on incremental costs to consumers are likely to see resilient earnings.

The sustained growth of e-commerce and the integration of omnichannel capabilities remain pivotal for retail success. Companies investing in seamless online shopping experiences, coupled with efficient last-mile delivery, are attracting a broader customer base. The fusion of physical and digital channels — such as click-and-collect options and curbside pickups —offers a competitive edge, particularly as consumers seek convenience and flexibility.

Efficient inventory management will be a critical determinant of retail profitability this earnings season. Retailers grappling with excess inventory from prior seasons may face margin pressures due to markdowns. Conversely, those leveraging advanced analytics and demand forecasting to optimize stock levels are better equipped to meet consumer demand while safeguarding profit margins.

4 Retail Stocks Poised for Earnings Surprises

Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Abercrombie & Fitch: Zacks Rank #2 & Earnings ESP of +4.59%

Abercrombie & Fitch stands out as a strong investment choice. The company excels in integrating digital and physical retail channels, offering a seamless shopping experience and driving higher customer satisfaction and loyalty. Strategic marketing initiatives, particularly targeted campaigns in key markets, have been effective in boosting brand visibility and customer acquisition. The introduction of innovative product lines meets specific customer needs and broadens the brand's appeal. Abercrombie & Fitch’s regional operating model, with a focus on the Americas, the EMEA (Europe, the Middle East and Africa) and the APAC (Asia-Pacific), provides a solid foundation for global expansion.

Investors can count on Abercrombie & Fitch with a Zacks Rank #2 and an Earnings ESP of +4.59%. The Zacks Consensus Estimate for third-quarter fiscal 2024 earnings per share has risen by a penny to $2.32 in the past 30 days. The consensus estimate suggests an increase of 26.8% from the year-ago period. ANF has a trailing four-quarter earnings surprise of 28%, on average. The company will report numbers on Nov. 26 before the opening bell. You can see the complete list of today’s Zacks #1 Rank stocks here.

Urban Outfitters: Zacks Rank #2 & Earnings ESP of +8.17%

You may consider Urban Outfitters. The company's growth is fueled by its multi-brand approach featuring Anthropologie and Free People, allowing it to navigate a challenging retail landscape. Its success in the expansion of the Nuuly subscription rental service reflects its ability to adapt to evolving consumer demands, particularly for sustainable fashion solutions. Urban Outfitters’ focus on omnichannel integration enhances customer engagement and spending. 

Urban Outfitters has a Zacks Rank #2 and an Earnings ESP of +8.17%. The Zacks Consensus Estimate for third-quarter fiscal 2025 earnings per share has risen by a penny to 84 cents in the past seven days but still implies a decline of 4.6% from the year-ago period. URBN has a trailing four-quarter earnings surprise of 17.6%, on average. The company is slated to report financial numbers on Nov. 26 after the closing bell.

Casey's General Stores: Zacks Rank #2 & Earnings ESP of +5.22%

Casey's also deserves a mention. The company continues to distinguish itself in the convenience store sector through robust operational strategies that bolster its market position and financial performance. A resilient business operating model, stellar omnichannel capabilities, expanded customer outreach and exclusive private-label offerings strengthen Casey's competitive position. Through a strategic blend of organic growth and targeted acquisitions, Casey's is aggressively expanding its footprint.

CASY has a Zacks Rank #2 and an Earnings ESP of +5.22%. The Zacks Consensus Estimate for second-quarter fiscal 2025 earnings per share has risen by 1.2% to $4.28 in the past 30 days. The consensus estimate implies an increase of 0.9% from the year-ago period. Casey's has a trailing four-quarter earnings surprise of 15.8%, on average. The company is scheduled to report financial numbers on Dec. 9 after the market closes.

Dollar Tree: Zacks Rank #3 & Earnings ESP of +2.80%

Dollar Tree is worth betting on. The company’s strategic initiatives, including its multi-price expansion, footprint growth, private brand development and supply-chain modernization, position the company for success. DLTR remains confident in its ability to deliver value to customers and drive market share growth. With a strong financial foundation, an expanding customer base and a differentiated business model, Dollar Tree is well-positioned to navigate the evolving retail landscape and continue to generate value for investors.

Dollar Tree has a Zacks Rank #3 and an Earnings ESP of +2.80%. The Zacks Consensus Estimate for third-quarter fiscal 2024 earnings per share has risen by a penny to $1.07 in the past 30 days. The consensus estimate suggests an increase of 10.3% from the year-ago period. The company is scheduled to report quarterly numbers on Dec. 4 before the stock market opens.

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