The fourth quarter can be a make-or-break time for retailers as they close out the calendar year. With earnings reports due from the major retailers over the next month, investors should learn who came out on top during this past holiday season.

On a broader scale, it was a strong quarter based on retail sales data from the U.S. Department of Commerce. Retail sales rose 0.4% month over month in December, the fourth consecutive month of gains, making 2017 the strongest year for retail sales growth since 2014. October and November’s figures were also revised higher.

As the holiday season got underway, consumers were feeling upbeat as economic growth picked up steam, unemployment remained low and wages ticked higher. Consumer confidence hit a 17-year high in November, according to the Conference Board, and consumer sentiment remained not too far from 13-year highs, based on the University of Michigan’s survey.

That positive sentiment appears to have translated into more spending. Not only did retail sales end 2017 on a strong note, but the Federal Reserve also reported that revolving credit, which is primarily comprised of credit-card debt, increased by $11.2 billion to a record high of $1.023 trillion in November (December’s figures will be released in February).     

Despite the optimism, there are still challenges throughout the sector. 50 retailers filed for bankruptcy in 2017, according to S&P Global Market Intelligence, and many companies have announced restructuring plans, store closing,s and other cost-cutting measures. It’ll take some time to see whether or not those strategies pan out in the long-term.

All About the Holiday Numbers

The National Retail Federation, or NRF, reported that sales in the November-December period increased 5.5% compared to last year, the highest since 2010. While most companies don’t release preliminary results before reporting, there are a few exceptions.

Don’t Forget About the Returns

While the fourth quarter is known for holiday sales, there are inevitably going to be returns that come back. Since many retailers offer free shipping on online returns, that can add up and eat away at profit margins. Merchandise returns cost U.S. retailers more than $260 billion in 2015, according to the NRF.

Throughout December, consumers shipped more than 1 million returns packages to retailers on a daily basis, according to UPS (UPS). By some estimates, as much as 30% of items bought online end up being returned, roughly three times the average for in-store purchases.

Impact of Tax Reform

As a result of tax cuts, there have been quite a few companies across industries that have announced they’ll increase wages and offer additional bonuses to their employees. Those bonuses and raises, combined with lowered individual federal tax rates, might mean consumers have a little more spending money in 2018.

Hurricane Effects Still Trickling Through?

Looking at December retail sales, building material stores had the second highest increase, lagging only nonstore retailers (mostly online stores). Sales increased 1.2% on a month-over-month basis and were up 9.9% year over year on a seasonally adjusted basis, according to the U.S. Department of Commerce.

Looking Ahead to Earnings

There’s still a little ways to go before most of the retailers report. Amazon.com, Inc. (NASDAQ:AMZN) hasn’t confirmed its report date, but it is expected to report after market close on Wednesday, Jan. 31.

For the department stores, Macy’s (M) reports before market open on Tuesday, Feb. 27, Kohl’s (KSS) reports before market open on Thursday, Mar. 1 and Nordstrom (JWN) reports after market close the same day. Home improvement retailer Home Depot (HD) reports before market open on Tuesday, Feb. 20. Lowe’s Companies, Inc. (NYSE:LOW)  reports before the open on Wednesday, Feb. 28.

Looking at the big-box retailers, Walmart Stores Inc (NYSE:WMT) reports before the open on Tuesday, Feb. 20 and Target (TGT) reports before market open on Tuesday, Mar. 6.

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