Retail Earnings Reports: Should Bulls or Bears Go Shopping at The Gap (GPS), Ross Stores (ROST) & Sears (SHLD)?

On Thursday, retail stocks The Gap (NYSE: GPS), Ross Stores (NASDAQ: ROST) and Sears Holdings Corporation (NASDAQ: SHLD) are all scheduled to report earnings and its worth noting that these three retail stocks are up 86.6%, 42.1% and 73.6% respectively since the start of the year. Given that consumer confidence appears to be on shaky ground but July retail sales rose 0.8%, the first gain in four months while the June retail sales figure was revised to a weaker than expected 0.7% decline, any earnings reports from major retail stocks will be closely watched as the all important back-to-school shopping season is well under way. So what should traders and investors alike expect when The Gap (GPS), Ross Stores (ROST) and Sears Holdings Corporation (SHLD) report earnings? Here is a quick earnings report review and an overview of all three retailers:

The Gap (NYSE: GPS): Wall Street Grows More Cautious As Options Traders Get Bullish

The Gap is a global specialty retailer offering clothing, accessories and personal care products for men, women, children and babies through about 3,000 company-operated stores and about 200 franchise stores. On Tuesday, The Gap fell 0.06% to $34.61 (GPS has a 52 week trading range of $15.08 to $34.92 a share) for a market cap of $16.93 billion but the stock is up 86.6% since the start of the year, up 109.9% over the past year and up 106.6% over the past five years. The Gap will be reporting earnings after the market closes and Wall Street is expecting a 4.4% rise in revenue to $3.54 billion and a 37.1% EPS rise to 48 cents per share. Moreover, the last time The Gap reported earnings it also reported its fourth straight quarter of beating Wall Street estimates plus the options trading bulls have been going long its calls just when analysts have become more cautious on the stock. In fact, Piper Jaffray believes The Gap's guidance for FY13 could miss consensus estimates and its slightly more cautious going into the coming earnings report but Piper also believes that Gap is one of the best positioned retailers for the second half plus its raised its price target from $38 to $41. Nevertheless and when The Gap reported July sales, its CEO said that they were pleased with their second-quarter sales performance along with the continued positive trend being seen in North America. So perhaps investors should not expect any big negative surprises with the official Gap earnings report.

Ross Stores (NASDAQ: ROST): Wall Street’s Optimism Has Been Rising For Good Reason

Ross Stores operates Ross Dress for Less®, the largest off-price apparel and home fashion chain in the USA with 1,037 locations in 29 states, the District of Columbia and Guam plus it operates 88 dd’s DISCOUNTS® in seven states that feature a more moderately-priced assortment. On Tuesday, Ross Stores fell 0.21% to $67.54 (ROST has a 52 week trading range of $33.50 to $70.04 a share) for a market cap of $15.24 billion plus the stock is up 42.1% since the start of the year, up 88.45% over the past year and up 376.5% over the past five years. Ross Stores will be reporting earnings before the market opens on Thursday and Wall Street expects a 11% revenue rise to $2.32 billion and a 26.6% EPS rise to 81 cents plus it should be noted that ROST has met Wall Street expectations for four straight quarters. Wall Street’s estimates for Ross Stores have been rising and the Street has become more optimistic about the stock in general. Likewise and at the beginning of August, Ross Stores raised its second-quarter profit forecast after reporting strong sales trends during July (same store sales jumped 7% while total sales rose 12%) as Ross has benefited from the current weak economy that has shoppers watch their spending while seeking out discounts whenever and wherever they can. Hence, there are plenty of reasons to be optimistic about the Ross Stores’ earnings report.

Sears Holdings Corporation (NASDAQ: SHLD): About to Become a REIT?

Sears Holdings Corporation is a leading integrated retailer with over 3,900 full-line and specialty retail stores in the United States and Canada plus SHLD owns important proprietary brands such as Kenmore, Craftsman and DieHard and it’s the country’s largest provider of home services with more than 11 million service calls made annually. On Tuesday, Sears Holdings Corporation rose 1.49% to $55.17 (SHLD has a 52 week trading range of $28.89 to $85.90 a share) for a market cap of $5.87 billion plus the stock is up 73.6% since the start of the year, down 9.2% over the past year and down 58.5% over the past five years. Earlier this weeks, there were reports that Sears Holdings Corporation may sell off its Lands End unit as part of its ongoing restructuring initiative. Lands' End accounts for as much as half of Sears’ profits but given that the company has already filed to have an IPO for its Hometown outlets and hardware stores, Sears Holdings Corporation itself would be left with just its poorly performing Sears and Kmart stores, some strong brands and a big real estate portfolio. With that in mind, Wall Street expects Sears Holdings Corporation to report a 6.8% decline in revenue to $9.63 billion and a net loss of 84 cents per share – better than the net loss of $1.13 reported a year ago. Sears Holdings Corporation itself is hoping to break a four-straight quarter streak of revenue declines but one has to wonder whether such a performance will would justify the stock’s 73.6% rise since the start of the year.

The Bottom Line. Going into earnings, Ross Stores (ROST) is looking like a sure thing while The Gap (GPS) may not be a sure win and as for Sears Holdings Corporation (SHLD), investors really need to be asking just when was the last time they have shopped at a Sears or Kmart store.