Trade in Groups

Retail earnings are an important pulse check for the state of the U.S. economy.

Investors watch retail companies’ performance as a key indicator of consumer spending. Such quarterly performance is additionally referenced as an important benchmark in determining level of confidence in the economy. Friday’s earnings reports include two consumer-oriented companies.

Signet Group retails jewelry and watches with locations in the United Kingdom and the United States. Parlux Fragrances designs, manufactures, and distributes high-end fragrances and beauty products which are sold worldwide. Companies that miss Wall Street’s earnings targets, more often than not, schedule their earnings conference calls on Fridays, as some investors are distracted from upcoming weekend plans and activities. Given today’s market conditions of high energy and food staple prices, the credit crunch, and related economic challenges, Friday’s retail earnings – if negative – may cause a temporary decline in the stock market, as a reflection of waning economic confidence. It can signal consumers’ caution and cutbacks in non-essential spending. If Friday’s retail earnings are generally positive, the economy will be credited with resiliency during uncertain times. In a global market, companies have international channels for capturing growth in other areas of the world, providing management an opportunity to mitigate U.S. based risk.

Still, recent trends in the oilfield, housing, and financial sectors may cause overarching concerns that amplify the reactions of investors, due to their perceptions and outlook for the retail industry.

Written by: Marvin Dumon