Earnings: Consumer Spending in the Spotlight

Reports this week from MasterCard, Visa, VF Corp, Time Warner, and P&G should indicate if the consumer is starting to spend again

by Mae Anderson, AP

When the economy screeched to a halt late last year, so did consumer spending, which accounts for 70% of all U.S. economic activity. That's why the latest string of quarterly reports will be closely watched for any indication that consumers feel more confident about parting with their money.

Consumers curbed their spending to an unprecedented degree as they worried about declining home values, tight credit, and unemployment. But recent data indicates the worst may be over. The government reported last month that consumer spending rose in February. It was the second month in a row spending rose, following half a year of declines.

Among the major companies reporting earnings this week, Visa (V) and MasterCard (MA) will likely offer some insight into spending habits. VF Corp. (VFC) is scheduled to report, too, providing some visibility into overall apparel sales.

Important Economic Numbers Coming

Furthermore, this week is set to bring significant economic data, including first-quarter gross domestic product figures and consumer confidence estimates, giving an even better picture of the economy.

Sam Stovall, a chief investment strategist of U.S. equity research for Standard & Poor's, said quarterly reports and economic indicators this week will help investors who are trying to look six months down the line for any letup in the recession. "If they feel good about what they see, chances are they are going to be voting with their wallets," he said.

Here are the major consumer-related companies reporting results this week:

VF Corp.

—Why it's important: Jeans are an American staple, and VF's results should provide a good indication of how they're selling. The company makes jeans under brands ranging from low-priced Wrangler to premium Seven for All Mankind. One of the largest apparel makers, VF also makes North Face outerwear and Vans footwear.

—When it will report: Tuesday, Apr. 28.

—What the experts say: On average, analysts polled by Thomson Reuters expect VF to post a profit of 94¢ per share on revenue of $1.74 billion. In the same quarter of last year, the company recorded a profit of $1.33 per share on revenue of $1.85 billion.

—You'll know the economy is improving if: VF says retailer destocking of inventory has bottomed out or that consumer demand has stabilized or increased. Any uptick in sales could indicate shoppers are spending more on basics such as jeans, a category that has been weak for VF.

—You'll know the economy is not improving if: The company reports a slowdown in its outdoor division, which includes Jansport backpacks, North Face, Vans, and other brands. That division is the company's strongest, and any weakness there could signal consumers are still cutting back.

—The quote: "I expect good results from VF driven by their brands like North Face outperforming," said Wedbush Morgan analyst Jeff Mintz. "But the bigger jeans brands like Wrangler and Lee will provide a good read into how the overall consumer is doing."

Time Warner (TWX)

—Why it's important: The media giant has a large presence in cable TV networks with CNN and TBS; movies with its Warner Bros. studio; the Internet through AOL; and magazines run by Time Inc. That makes it a good barometer of the health of the advertising market and a gauge of how consumers are choosing to entertain and inform themselves during tough times.

—When it will report: Wednesday, Apr. 29.

—What the experts say: On average, analysts polled by Thomson Reuters expect Time Warner to post a profit of 38¢ per share on revenue of $6.8 billion.

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