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ORLANDO, Fla. — Big-name retailers reported mostly positive early holiday results on Monday, but their stocks declined as Wall Street remained unimpressed.
Lululemon, Abercrombie & Fitch, and American Eagle raised their fourth-quarter forecasts on Monday following a strong response from shoppers during the crucial holiday period. Urban Outfitters also experienced robust holiday growth, while Macy’s indicated that its key quarter was not progressing as well as expected.
Despite the positive results, the shares of many of these companies traded lower on Monday. Abercrombie’s stock saw the most significant drop, falling by 15%, leading investors to question whether its rapid growth is slowing down.
Lululemon now anticipates sales growth between 11% and 12%, reaching $3.56 billion to $3.58 billion, up from the previous range of $3.48 billion to $3.51 billion. Excluding an additional fiscal week in the fourth quarter of 2024, Lululemon expects sales growth between 6% and 7%.
The company also raised its profit forecast, with fourth-quarter earnings per share projected to be between $5.81 and $5.85, compared to the earlier guidance of $5.56 to $5.64. It expects gross margins to increase by 0.3 percentage points after previously predicting a decline of 0.2 to 0.3 percentage points.
“Lululemon’s finance chief Meghan Frank stated in a release, “During the holiday season, our guests responded well to our product offering, enabling us to increase our fourth-quarter guidance.” Lululemon’s stock rose nearly 1% on Monday.
Meanwhile, Abercrombie also expects its holiday quarter to perform slightly better than anticipated. The apparel company adjusted its net sales growth outlook to a range of 7% to 8%, up from the previous guidance of 5% to 7%.
Abercrombie now forecasts full-year sales growth of 15%, compared to the earlier expectation of a rise between 14% and 15%. This outlook contrasts with the exceptional numbers Abercrombie achieved last year when holiday sales surged by 21% compared to the previous year.
Investors optimistic about Abercrombie’s future suggest that the company’s growth slowdown is reasonable as it matures and faces tougher year-over-year comparisons. However, after about two years of significant stock growth, some investors may be turning more cautious.
Abercrombie’s full-year sales guidance is close to what it reported last year when revenue increased by 16%. CEO Fran Horowitz indicated in a news release that the company will focus more on increasing profits than sales to enhance long-term shareholder value.
The retailers issued their guidance ahead of the annual ICR conference in Orlando, where major U.S. retailers are expected to reveal early holiday results and discuss their performance with investors and analysts. The conference, attended by Wall Street’s leading banks, law firms, private equity firms, and investors, typically sets the tone for consumer deal-making and retailer performance at the beginning of the year.
Macy’s, another participant in the conference, released early results that were less positive than some of its competitors. The department store now expects sales to be at or slightly below the previously announced range of $7.8 billion to $8.0 billion, causing its shares to drop more than 8% on Monday.
Urban Outfitters also shared early holiday results, reporting a 10% growth in net sales for the two months ending Dec. 31 compared to the same period last year. Comparable retail segment sales increased by 6%, driven by strong online sales.
Urban’s namesake brand experienced a 4% decline in comparable sales, while Anthropologie and Free People saw growth of 10% and 9%, respectively.
Additionally, Urban’s rental service Nuuly saw a 55% increase in sales, supported by a 53% rise in average active subscribers. Urban’s shares fell by 2% on Monday.
American Eagle also raised its fourth-quarter outlook, expecting an operating profit of approximately $135 million, up from the previous guidance of $125 million. The company reported that comparable sales for the quarter ending Jan. 4 increased by low single digits, compared to the previous guidance of up 1%.
However, total revenue is projected to decrease by around 5% due to American Eagle’s fiscal calendar having one fewer week than the previous year, resulting in an $85 million impact on fourth-quarter sales and a $60 million impact for the full year. Shares fell about 4% on Monday.
Overall, the holiday shopping season was not expected to deliver the exceptional numbers seen in the aftermath of the Covid-19 pandemic. The National Retail Federation anticipated sales growth between 2.5% and 3.5%, with minimal real growth when accounting for inflation.
Nevertheless, early indicators suggest that the holiday season may be slightly better than expected. According to Mastercard SpendingPulse, retail sales in the U.S. during the holiday season, excluding automotive sales, increased by 3.8% year over year between Nov. 1 and Dec. 24, encompassing in-store and online sales across payment types.
