3 Things to Watch in the Stock Market This Week

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Stocks fell last week last week, reversing some of the gains that investors saw last week. Both the Dow Jones Industrial Average (^DJI 0.00%) and the S&P 500 (^GSPC 0.95%) shed about 1% and are down 10% and 14% so far in 2022, respectively.

Dozens of stocks are set to announce quarterly earnings results in the week ahead, and here we’ll preview the reports due out from Five Below (FIVE 1.00%), Stitch Fix (SFIX -4.52%), and Dave & Buster’s (PLAY 4.86%).

Image source: Getty Images.

1. The profit margin at Five Below

Investors are bracing for some potentially bad news from Five Below in its Wednesday earnings report. While the company has seen strong growth in recent quarters, sales gains slowed in the most recent quarter. The biggest fears heading into this week’s announcement include further demand pressure for the retailer, which posted a 3% uptick in comparable-store sales in the previous quarter.

CEO Joel Anderson and his team will update investors on that expansion pace this week. Shareholders will also learn whether the company avoided the type of inventory challenges that hurt companies like Target through early May. Consumers are quickly shifting their spending priorities in the wake of the pandemic, and those moves mean new profit risks for retailers .

Follow Five Below’s operating margin for signs of struggles here. The chain might also update its 2022 outlook, which currently calls for comps to rise by around 3% after soaring 20% last year.

2. The growth rate at Stitch Fix

Stitch Fix hasn’t given investors much in the way of good news in its last few quarterly reports. That’s why expectations are low heading into Thursday’s fiscal Q3 announcement. The e-commerce specialist is likely to see sales decline by about 10%, in fact, compared to a 3% uptick in the selling period that ended in late January.

Stitch Fix has been struggling to market both its curated apparel subscriptions and its new direct-buy offering. The combination of those two different businesses created confusion for shoppers last quarter, and the main question this week is whether management was able to fix that core issue.

CEO Elizabeth Spaulding and her team might update the fiscal 2022 outlook one final time this week, too. That forecast now calls for sales to be flat or down slightly, and the stock should remain pressured until Stitch Fix can show a clear path back toward growth and steady profitability.

3. Customer traffic at Dave & Buster’s

At a time when more people are prioritizing spending on in-person entertainment, Dave & Buster’s might seem like a clear winner. The chain focuses on dining and amusement, two categories that are booming in the economy today.

But sales fell in the most recent sales period, which ran through late January, and that decline appeared to ease into Dave & Buster’s fiscal Q1, executives said back in late March. We’ll learn on Tuesday whether the entertainment giant is still seeing weaker metrics like customer traffic. That pressure could be amplified by staffing challenges and higher costs on labor and food.

On the other hand, Dave & Buster’s might issue a bullish outlook for the summer season if it can execute through these industry challenges. In either case, the stock should see a volatile trading week ahead.