These 3 Reports Will Tell Us Much About the Current Economy

By the slimmest of margins, the U.S. economy slipped into a recession after real gross domestic product, or GDP, retreated 0.6% in the second quarter. 

Still, many market prognosticators have brushed aside the technical definition of two straight quarters of negative GDP growth, asserting that recessionary times aren’t reality. A healthy jobs market and resilient consumer spending are often cited as reasons investors should see the glass as half full.

However, with inflation still wreaking havoc on the budgets of many American households and the income statements of many American corporations, some say the worst is yet to come. 

Our next big clue as to the economy’s health will come from next week’s Fed meeting when yet another large rate hike is expected to be unleashed to help calm the impact of elevated prices. 

Soon thereafter, other important clues will arrive from some of the nation’s biggest economic bellwethers that are tied to key economic areas like retail, e-commerce, and tourism. By the time these three companies share their latest results and outlooks, what lies ahead in Q4 could be a bit less murky.

What are Costco’s Sales Growth Trends? 

Costco Wholesale Corporation (NASDAQ: COST) will report its fiscal Q4 earnings on September 22nd. Since the unusual reporting period will cover the 12-week period through early August, we already have a sense of how things will go based on the retailer’s monthly sales updates. In May, June, and July respectively, Costco posted comparable store sales growth of 15.5%, 18.1%, and 10%. These numbers suggested that the health of the consumer is still good, or at the very least, that people are simply paying more for merchandise and gasoline. 

What we’ve also learned though is that online shopping habits have moderated from where they were a year ago. In August, Costco e-commerce sales grew only 3.9%. Some growth is better than no growth, but the slowdown from prior months revealed that consumers are limiting big ticket purchases like TV’s and laptops to offset higher food prices. 

Wall Street’s current forecast for Q4 revenue implies 13% year-over-year growth and a slowdown from the 16% posted in each of the last two quarters. A good chunk of the increase will undoubtedly relate to higher price tags. More importantly, management’s insight around customer traffic and what things people are buying should indicate just how cautious consumers are heading into the holiday shopping season.

What are FedEx’s Long-Term Financial Goals?

FedEx Corporation (NYSE: FDX) kicks off its fiscal 2023 earnings calls after the market close on September 22. Management’s commentary about consumer and business shipping activity always gives the market good information about economic health. A few days prior, the company will hold its annual stockholders meeting where investors will look to be reassured that the future is bright despite the near-term pressures of higher fuel costs and softer e-commerce activity.

It’s been a quiet summer for FedEx from a PR perspective. The last time we got some sort of formal update was late June when it unveiled its “Deliver Today, Innovate for Tomorrow” strategy. The leadership team presented its plan to create more value for customers, employees, and investors as well as announcing its financial targets for fiscal 2025. FedEx is targeting a $3.0 billion to $4.5 billion increase in operating income over fiscal 2022 and earnings growth in the 14% to 19% range through fiscal 2025. 

To reach these goals, the package delivery giant will have to work through a set of challenges that includes higher fuel and the impact of inflation on consumer and business spending. With a new CEO at the helm, FedEx will look to rediscover its growth of yesteryear by making operations more efficient and re-prioritizing the shareholder through dividend hikes and an expanded buyback program. 

Is Carnival Investing for Growth?

You wouldn’t know it by Carnival Corporation’s (NYSE: CCL) stock return over the past year, but consumer demand for cruises is on the rise. Unfortunately, so too are fuel expenses, which along with higher interest expenses tied to capital spending have sunk the cruise line operator’s stock back to its early pandemic lows.

This week Carnival’s Princess Cruises division unveiled an interesting deal with boutique fitness company Xponential Fitness that will bring branded fitness content aboard the fleet of Princess cruise ships. The offerings, which are on trend with travelers’ growing interest in health & wellness activities, will be integrated with Princess’ OneSpaWorld business. More importantly, the move reflects Carnival’s confidence that travelers worldwide will continue to seek out cruise getaways and a belief that “if you build it, they will come.”

It remains to be seen if Carnival’s ambitious investments and partnerships will lead to better financials over the next few years. The market will get an early indication of the strategy’s traction when Carnival reports August quarter results at the end of the month. Additional insight into consumers’ willingness to book cruises will also show if smoother waters are ahead for the cruise line industry.