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The week in preview: Eye on retail -- Walmart, Macy's, Blockbuster ...

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Last week offered mixed messages about whether an economic recovery is indeed underway. The unemployment figures were not as bad as feared, but July sales numbers were nothing to write home about, despite the wild popularity of the so-called cash-for-clunkers program.

The question is, where has consumer confidence (and consumer spending) been? Retail is a good place to look, and as it turns out, this week several shopping mall and strip mall favorites will be reporting earnings for the most recent quarter.

Analysts surveyed by Thomson Reuters are optimistic about Advance Auto Parts Inc. (NYSE: AAP), the nation's number two auto parts retailer. Its second-quarter profit is expected to be 4.8% higher than a year ago, or $0.83 per share. Revenue for the quarter is expected to be 6.4% higher, or $1.3 billion. For the full year, the forecast so far is for $2.99 per share (+8.0%) on $5.4 billion (+5.6%). Earnings of the Roanoke, Va.-based company have topped expectations in recent quarters, by as much as 13 cents per share. The long-term EPS growth forecast is 13.0%, which is better than the retail industry average, and about the same as larger rival AutoZone Inc. (NYSE: AZO). Advance's earnings multiple is 14x, and this dividend-paying company has reported increasing cash flow from operations over the past few quarters. The First Call consensus recommendation is to buy AAP; TheStreet.com considers it a top stock. Shares are still trading near the multiyear high of $47.41 from the end of July.

On the other hand, in the second-quarter in which Walmart Stores Inc. (NYSE: WMT) revamped the electronics section of its stores and announced a share buyback program, the Bentonville, Ark.-based retail giant is expected to report earnings of $0.86 per share, the same as a year ago. Revenue for the quarter is expected to be marginally higher, or $103.1 billion. The full year forecast, though, is for earnings up 3.9% from a year ago to $3.56 per share on revenue of $413.5 billion (+1.9%). Walmart's earnings have met or beat expectations in recent quarters. The long-term EPS growth forecast is 11.9%, which is also better than the retail industry average. Its forward PE ratio estimate is 13.0. Walmart's board approved an increase in its annual dividend earlier this year. The consensus recommendation remains to buy WMT; the Motley Fool likes it for its growth potential. At $49.29, shares are a little higher than the 52-week low of $46.25 back in February. The share price is down 12.1% year to date.

Kohls Corp. (NYSE: KSS) is one of several retailers expected to report marginally lower earnings this week -- others include Fossil Inc. (NASDAQ: FOSL), Sara Lee Corp. (NYSE: SLE), and Urban Outfitters Inc. (NASDAQ: URBN). Results could still please investors if they include an upside surprise and/or optimistic guidance. Kohls' second-quarter profit is expected to be four cents per share less than a year ago to $0.73, which is in line with recent guidance. Revenue is expected to be $3.8 billion, which up 1.3% from a year ago. For the third quarter, analysts so far expect the profit to fall to $0.47 per share but for revenue to rise to $3.9 billion. Earnings of the Wisconsin-based discount department store operator have topped expectations in recent quarters, by as much as seven cents per share. The long-term EPS growth forecast is 14.3%, which is better than rival Target Corp. (NYSE: TGT). But its earnings multiple is 18x, also higher than that of Target. Cash flow from operations has grown over the past few quarters. Analysts, on average, recommend buying KSS, and have for more than 90 days. Shares are up 21.9% in the past three months and are creeping up on the 52-week high of $56.00 from last September.

Second-quarter earnings declines are expected to be greater for Nordstrom Inc. (NYSE: JWN), Red Robin Gourmet Burgers Inc. (NASDAQ: RRGB), and especially for Macy's Inc. (NYSE: M). Analysts expect Macy's to post earnings of $0.12 per share, down 58.6% from a year ago. Sales are expected to have diminished as well, 9.1% to $5.2 billion. And in the third quarter, the forecast is for a per-share loss and a further decline in revenue. But results have been better than expected in recent quarters, beating estimates by as much as 11 cents per share. The long-term EPS growth forecast is 9.5%, which is in the same neighborhood as that of Nordstrom, but Macy's earnings multiple is 20x. Macy's declared a quarterly dividend in May. The consensus recommendation shifted from buy to hold Macy's in the past quarter, but BusinessWeek featured it as a bargain, if the economy begins recovery. Shares have raced upward 49.6% in the past month to $15.99 but are still 22.9% lower than a year ago.

Analysts expect Abercrombie & Fitch Co. (NYSE: ANF), Ethan Allen Interiors Inc. (NYSE: ETH), and JCPenney Co. (NYSE: JCP) to report that they swung to losses from year-ago profits. For a second quarter during which its president stepped down, JCPenney is expected to post a net loss of $0.03 per share on sales of $3.9 billion, compared to a profit of $0.52 and $4.3 billion in the same quarter of last year. For the full year, the forecast is for a profit of $0.87 per share (-65.5%) and revenue of $17.5 billion (-5.2%). Earnings of this dividend-paying company have beat expectations by a penny or two per share in recent quarters. The long-term EPS growth forecast is 10.3%, which is better than rival Macy's. Cash flow from operations swung to positive territory in the previous quarter. The consensus recommendation is to buy JCP; Jim Cramer preferred it to the Gap Inc. (NYSE: GPS). At $34.43, shares are 12.9% higher than three months ago, but 3.7% lower than a year ago.

Blockbuster Inc. (NYSE: BBI) is expected to report a loss for its second quarter as well, but a narrower one. Analysts are looking for the world's largest video rental chain to report a loss of $0.12 per share and revenue of $1.1 billion, compared to a loss of $0.23 and sales of $1.3 billion in the same period of last year. Analysts so far expect to see a profit of $0.18 per share for the full year, as well as $4.7 billion is sales (-11.8%). But the Dallas-based company has fallen short of expectations in three of the past four quarters, and the long-term EPS growth forecast is 15.0%, which is less than that of rival NetFlix Inc. (NASDAQ: NFLX). Cash flow from operations was still in negative territory at last report. Yet short interest was down over the past month and the consensus recommendation remains to buy BBI. At $0.92, shares are well off the 52-week high of $3.05 from last September, but have risen 50.8% in the past month.

For a more up-to-date look at consumer sentiment, watch for the TIPP Economic Optimism Index for August and the preliminary University of Michigan Consumer Sentiment Index for August, both due out this week.

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Last updated: November 25, 2009: 04:56 PM

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