WORK - This Week's Earnings Repertoire
Last week, both the Dow Jones Industrial Index and the S&P 500 shed about 2%. Moreover, the Dow was pushed back negative territory while the S&P is still up about 6% in 2020 and it has Big Tech to thank for that. But, there are few big companies whose results the market is eagerly waiting for. They are Lululemon Athletica (NASDAQ:LULU), GameStop (NYSE:GME), Slack Technologies (NYSE: WORK), Oracle (NYSE: ORCL) and Dave & Buster’s Entertainment (NASDAQ:PLAY).
Are Yoga mats still popular after the lockdown?
Yoga-gear seller impressed investors with its last earnings report. Lululemon Athletica saw only a slight decline in sales when COVID-19 started its relentless march across the globe as mats became our quarantine must-haves. More importantly, the yoga accessories specialist even managed to generate a profit despite closures of its physical stores. However, the mid-June report raised new questions that will now be answered after markets close. One is how the company dealt with inventory. Did it resort to writedown charges that hurt peers like the almighty Nike (NYSE: NKE) or succumbed to price cuts. But perhaps most importantly, investors are waiting on the updated outlook for the second half of the year. In 2020, the stock has beaten the market.
Oracle- will improvements outweigh increased costs?
On Thursday, Oracle will release its first-quarter fiscal 2021 results. Its results are expected to have benefited from strong demand for its Cloud Infrastructure services that gained traction across enterprises in Asia, with Nissan (OTC: NSANY) being among its key deal wins. Efforts in enhanced security and management, higher-performance and cost effectiveness are expected to have brought in improvements. Even the star of the pandemic, Zoom Video Communications (NASDAQ: ZM) implemented Oracle Cloud Infrastructure services to enhance video meeting solutions. On the other hand, increasing expenses on product development and competition from Salesforce.com (NYSE: CRM) are expected to have negatively impacted the fiscal first-quarter performance.
GameStop – Can Profitability Be Achieved?
Wednesday’s GameStop earnings report should reflect several major challenges that the company is facing. Besides the pandemic-induced store closures, the video game retailer’s profits are also being harmed with a pause in hardware spending as new console releases are yet to be released by the end of the year.
These issues are likely to result in a modest improvement in its growth trend. GameStop’s sales already declined at 22% compared to 34% last quarter. However, its margins should be protected by its light inventory. But the main question is whether it can achieve its this year’s profitability goal with these unprecedented first six months.
Can restaurant and entertainment keep their heads above water?
Investors are bracing for some bad news with every restaurant business these days, and Dave & Buster’s Entertainment is no exception. This Dallas-based business will announce second-quarter results on Wednesday afternoon. With COVID-19 restrictions, sales plummeted by 56% in the first quarter and are overall predicted to fall more than 20% as customer traffic is expected to remain weak for the time being. Aggressive cost cuts and less expansion with new store launches are likely in the cards, but depending on its measures, the company can gain valuable opportunities to thrive in a prolonged recession that we are most likely in for.
Takeaway
If this unprecedented crisis has taught us anything is that anything is possible. Rules are not set in stone and they can be rewritten. Although Big Tech is winning this ‘everything-but-fun’ game, it does not exclude other companies from winning as well. What all amounts to are simple laws of nature that Darwin knew so well: those who are most adaptable to change are the ones who survive. In Big Tech’s case, it was both the strongest and most adaptable this time round. But for flexible companies that embraced this change as an opportunity for improvement, “miracles” can happen.
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