Retail Sales, Earnings to Help Gauge Consumer Spending

The Commerce Department is set to release its retail sales report on Wednesday morning at 8:30 a.m., providing investors with a little more insight into how higher payroll taxes and rising gas prices are impacting Americans' spending habits.

Expectations call for a slight increase of 0.2 percent from January.

The report is being watched closely because although taxes and gas prices are pinching consumer pocketbooks, the labor market continues to show signs of strengthening. The government's February jobs report was much stronger than expected with the economy adding more jobs and the unemployment falling. Positive movement in the labor market does impact consumer confidence, which can subsequently buoy up consumer spending.

Wednesday also will bring quarterly reports from specialty retailers Express and Men's Warehouse, which could provide another gauge of consumer spending.

Warehouse retailer Costco Tuesday beat Wall Street's estimates with its earnings, though revenue came in below expectations. However, many analysts said they expect some of Costco's sales growth is coming from consumers making bulk purchases as they worry about their own financial and economic circumstances. Costco also noted revenue from membership fees rose 15 percent.

(Read More: Loyal Customers Help Costco Win Market Share)

For Express, there is concern that tax-related pressure, poor weather trends and difficult year-over-year same-store sales comparisons may be headwinds. However, JPMorgan analysts Brian Tunick and Simeon Siegel told investors that based on their own channel checks, Express' fashion offerings are resonating with shoppers.

JPMorgan expects improved inventory levels will bode well for margins and it boosted its fiscal year 2013 and 2014 earnings estimates. For fiscal 2013, the firm expects Express to earn $1.75 a share, up from a prior estimate of $1.72 a share, while the estimate for fiscal 2014 was bumped up to $1.98 a share from $1.96 a share.

Source: Express | Facebook

For the fiscal fourth quarter, the analysts expect Express to earn 80 cents a share, which tops the current consensus estimate on Wall Street of 74 cents per share on revenue of $722.4 million, according to Thomson Reuters.

Express shares have risen 26 percent so far in 2013 to about $18.86. JP Morgan's price target was increased to $23 from $22.

(Read More: Five Turnaround Tips for Ron Johnson, JC Penney and Others)

As for Men's Warehouse, last quarter the men's apparel retailer missed Wall Street's earnings estimates and cut its outlook for the quarter it will report on Wednesday.

The CEO said the impact of super storm Sandy and "consumer distractions caused by the presidential election, the fiscal cliff and other economic concerns contributed to our reduced traffic levels."

Although the immediate impacts of Sandy have subsided and the presidential election has passed, consumers are still facing considerable macroeconomic pressures.

Men's Warehouse estimates its results will be within be between a loss of 5 cents a share to a gain of 1 cent a share.

Although only a small group of analysts cover the stock, the average estimate reported by Thomson Reuters for the company is a loss of 5 cents per share on revenue of $610 million for the company's fiscal fourth quarter.

-By CNBC's Courtney Reagan; Follow her on Twitter @CourtReagan

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