More volatility expected with earnings reports

The wild swings in consumer stocks this week that erased $503 billion in market value are far from over, with earnings reports from well-known retailers including Dollar General, Macy’s and Costco still to come.

Volatility in consumer stocks reached levels not seen since the early days of the pandemic-driven rout as retailers from Walmart to Target cut their annual profit forecasts and stoked concern over the effect of rising inflation and the challenge to pass on higher costs to consumers.

Walmart and Target this week each posted their biggest one-day declines since 1987 after their results, sparking 19 percent and 30 percent selloffs, respectively. Ross Stores Inc. was the latest to trim its forecasts for comparable sales and profit, fueling its biggest decline since 1986.

“The implications for retailers that have yet to report are not promising,” said John Zolidis, president of Quo Vadis Capital, after Walmart and Target’s bleak updates. Several brokerage firms, including Truist Securities and Oppenheimer, have trimmed profit expectations for retailers that have yet to release quarterly results, including Dollar General and Costco.

Gap Inc., which will report earnings after markets close Thursday, forewarned investors last month, slashing its quarterly sales outlook on “macroeconomic dynamics” and execution challenges at its Old Navy brand.

Here’s a look at some of the other notable retailers slated to report next week:

• Macy’s: The department store operator will report firstquarter results ahead of the bell Thursday. The stock is down 29 percent this year, after more than doubling in 2021 as the company benefited from pentup demand as consumer mobility resumed. Shares are likely to be volatile after earnings, with an implied one-day move of 14 percent, according to data compiled by Bloomberg.

• Dollar General Corp.: The discount retailer also reports earnings Thursday. Its stock is expected to move more than 8 percent in either direction after it releases results, data compiled by Bloomberg shows. That’s bigger than the moves seen after the past eight quarterly reports were issued. Dollar General has declined 20 percent this year.

• Costco: All eyes are on Costco after peer BJ’s Wholesale Club bucked the trend this week and reported earnings and sales that grew in the quarter. As one of a few retailers that still reports monthly sales, the company’s April net sales increased 13.9 percent year over year after climbing 18.7 percent in March. Costco, which is due to report after the bell Thursday, has slumped 26 percent this year.