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3 Things to Watch in the Stock Market This Week

Stocks rose in volatile trading last week, as the Dow Jones Industrial Average (DJINDICES: ^DJI) gained nearly 2% and the S&P 500 (SNPINDEX: ^GSPC) rose by just under 1%. Both indexes are higher so far this year after rallying in 2020.

Earnings season continues over the next few days, with some of the market's favorite stocks reporting results. That list includes Stitch Fix (NASDAQ: SFIX), Ulta Beauty (NASDAQ: ULTA), and Campbell Soup (NYSE: CPB), whose announcements we'll preview below.

Image source: Getty Images.

1. Stitch Fix's order volume

Stitch Fix shares have surged since its early December earnings report. That rally set some elevated expectations for its Monday update. After all, the apparel giant shocked Wall Street in its last outing by achieving record customer gains even as it pivoted to cater to demand for more-casual, around-the-home clothing.

This week's report should show evidence of rising market share, but keep an eye on user engagement, which is reflected in metrics like repeat order volume and average spending. These figures have been rising lately, implying accelerating sales growth ahead.

And look for CEO Katrina Lake and her team to discuss their expansion initiatives, including direct-buy options and a push into new apparel categories, as Stitch Fix aims for a dramatically higher sales footprint over the long term.

2. Ulta Beauty's sales slump

Ulta Beauty's sales were pinched by the pandemic last year, with falling retail traffic and slumping demand for makeup products in an era of social distancing. Investors on Thursday are hoping for signs that these negative trends are relaxing their grip on the business.

CEO Mary Dillon and her team said in December that sales figure should worsen in the fourth quarter after having improved to a 9% decline in the third. This holiday season will be like no other, executives said, as they were managing restricted customer traffic in many key markets. Revenue should fall by between 12% and 14%, they said.

Looking further out, investors have big questions about how engaged customers will be with the salon and makeup niches as the COVID-19 threat passes. Ulta Beauty won't have definitive answers on Thursday, but shareholders might get a sense of the lingering impact by following the chain's expansion plans. The retailer indicated late last year that it plans to open just 30 new locations in 2021, compared to over 100 in fiscal 2018.

3. Campbell Soup's organic sales

Campbell Soup announces its latest results on Wednesday, and investors are bracing for a growth slowdown. The consumer packaged goods giant expanded sales during the pandemic, but the intensity of that boost has lessened. Organic sales rose 8% last quarter compared to 12% in the previous quarter. Wall Street pros are predicting another deceleration this week, to around 6%.

The stock's trajectory since the December report suggests that investors believe Campbell Soup will return to its previous near-flat annual sales growth following 2020's pandemic-influenced surge. But the company could outperform that forecast if it can convince many of its new customers to keep using its soups, snacks, and meals even after the restaurant industry returns to full capacity in late 2021.

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Demitri Kalogeropoulos owns shares of Stitch Fix. The Motley Fool owns shares of and recommends Stitch Fix and Ulta Beauty. The Motley Fool has a disclosure policy.


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