ORLANDO, Fla. — Big retailers posted much better-than-expected early-holiday results on Monday, but their stocks fell after Wall Street was unimpressed.
Lululemon, Abercrombie & Fitch AND American Eagle on Monday raised its fourth-quarter guidance after strong buyer response during the all-important holiday season. City clothes also saw strong growth during the holiday season, but Macy's said its key quarter was performing worse than expected.
Still, shares of all these companies have seen declines since early Monday, with many down more than 5%. Abercrombie shares fell the most, falling about 20% as investors expected. its rapid growth is coming to an end.
Lululemon now expects sales to grow 11% to 12% to $3.56 billion to $3.58 billion, up from its previous range of $3.48 billion to $3.51 billion.
Excluding the extra fiscal week the company will have in the fourth quarter of 2024, Lululemon expects sales growth to be between 6% and 7%.
The company also raised its earnings outlook. Lululemon now forecast fourth-quarter earnings per share of $5.81 to $5.85, compared to its previous guidance of $5.56 to $5.64. It expects gross margins to expand by 0.3 percentage points after previously forecasting them to decline by between 0.2 and 0.3 percentage points.
“Our guests responded well to our product offerings over the holiday season, enabling us to increase our fourth quarter guidance,” CFO Meghan Frank said in a statement.
Meanwhile, Abercrombie also expects the holiday quarter to be slightly better than expected. The apparel company raised its net sales growth forecast to a range of 7% to 8%, up from its previous forecast of 5% to 7%.
Abercrombie now expects full-year sales to grow 15%. Sales were previously expected to grow by 14% to 15% during this period.
The forecasts differ from the spectacular results posted by Abercrombie last year, when holiday sales rose a staggering 21% compared to the year-ago period.
Investors bullish on Abercrombie would say it makes sense to see the company's growth start to slow as it matures and worsens year-to-date comparisons, but after about two years of explosive growth in some companies' shares, it could turn bearish.
Still, Abercrombie's full-year sales forecasts are similar to those reported last year, when revenues rose 16%.
In a press release, Abercrombie CEO Fran Horowitz signaled that the company will be more focused on increasing profits than sales in the future as it aims to “generate long-term shareholder value.”
“After expected two years of double-digit revenue and earnings growth, I am more confident than ever in the continued strength of our brands and operating model, supported by the exceptional capabilities we have built,” said Horowitz. “In 2025, we will strive to continue sustainable, profitable growth by executing on our goals to attract and retain customers around the world. Our goal is to leverage our healthy margin structure and balance sheet to grow operating revenues and earnings per share at a rate faster than sales.”
Retailers released their guidance ahead of ICR's annual conference in Orlando, when some of the most important U.S. retailers are scheduled to report pre-holiday results and meet with investors and analysts about their results. The conference brings together major banks, law firms, private equity firms and Wall Street investors and is known for setting the tone for consumer deals and retailer performance at the beginning of the year.
Macy's, which is scheduled to present at the conference, also released preliminary results but didn't have good news to report like some of its competitors. The department store now expects sales to be at or just below its previously reported range of $7.8 billion to $8.0 billion. Its shares fell more than 6% in intraday trading.
Urban Outfitters also released pre-holiday results and said net sales for the two months ended December 31 were up 10% compared to the year-ago period. Comparable retail sales increased 6%, driven by strong online sales.
Urban's namesake banner saw comparable sales decline 4% as the chain continued to underperform Anthropologie and Free People, where comparable sales increased 10% and 9%, respectively.
Meanwhile, sales at Urban Nuuly's rental service increased by 55%, driven by a 53% increase in average active subscribers.
Shares fell more than 6% in intraday trading.
American Eagle also raised its fourth-quarter forecast and said it expected operating profit of about $135 million, up from its previous forecast of $125 million. It said comparable sales for the quarter to Jan. 4 were up by a single-digit gain compared with earlier guidance of 1%.
Total revenue, however, will decline by about 5% due to American Eagle's financial calendar, which will be one week less than a year ago, the company said. The rescheduling is expected to impact sales by $85 million in the fourth quarter and $60 million for the full year.
Shares fell about 4%.
Overall, the holiday shopping season was not expected to see the volume of shopping that has become common following the Covid-19 pandemic. The National Retail Federation said it expected sales to increase during this period 2.5% and 3.5%. When you take inflation into account, there was real growth is expected to be minimal.
Still, some early readings signal that the holiday season may be upon us a little better than expected.
U.S. holiday retail sales, excluding automotive sales, increased by 3.8% year on year from November 1 to December 24, according to Mastercard SpendingPulse, which measures in-store and online sales by payment type.