Holiday 2024 sales were good for many retailers, but investors seemed unimpressed as some on Wall Street question whether slower growth could be on the horizon.
A number of retailers disclosed updated projections ahead of their presentations at the 27th Annual ICR Conference. Since mall traffic over holiday was strong, the general expectation has been that sales were good.
But the concern looming over the near-term horizon for many investors is the uncertainty over consumer spending, and where that could be headed in 2025. A pullback in spending would hurt margins. And there’s also the tariff threat from President-elect Donald Trump, which retail trade organizations have said would result in price increases to consumers as companies pass along the added costs.
Abercrombie & Fitch Co.
Specialty retailer Abercrombie on Monday raised its fourth-quarter net sales outlook to up 7 to 8 percent, above the prior 5 to 7 percent range. The full-year Fiscal 2024 outlook for net sales is now 15 percent, the upper end of its prior estimate range of 14 to 15 percent.
“Through fiscal December, we delivered record quarter-to-date net sales, exceeding the expectations we provided in November,” Abercrombie’s CEO Fran Horowitz said. “Total net sales growth was supported by comparable sales across regions and brands through the holiday selling period.”
Despite the raised guidance, shares of Abercrombie fell 18.6 percent in noontime trading on Monday and became the bellwether for retail stocks for the day’s trading session. It wasn’t the first time Wall Street expected more from the company. In August, the company reported a 21 percent second-quarter sales uptick. Shares of Abercrombie at the time also fell over investor worries on outlook and concerns that comparisons could become more challenging in the future.
Despite the stock sell-off, those concerns didn’t phase Jefferies analyst Corey Tarlowe, who said the specialty chain has “several levers to pull to drive continued robust top-line growth” and improved productivity to expand operating margin. He noted that the company plans for its operating income and earnings per share to grow faster than sales.
“We see the pullback as opportunity. This company has ample free cash flow generation as well that we think is unappreciated,” Tarlowe said. He is bullish on shares of Abercrombie and maintained his “buy” rating. The specialty chain is one of his top picks for 2025.
Lululemon Athletica Inc.
For yoga-inspired apparel brand Lululemon, net revenue is expected to be in the range of $3.56 billion to $3.58 billion, representing growth of 11 to 12 percent versus the same fourth quarter of fiscal 2023. That’s above the prior guidance range of $3.475 billion to $3.51 billion. Diluted earnings per share was guided to between $5.81 to $5.85, versus prior guidance of $5.56 to $5.64.
Lululemon’s CFO Meghan Frank said customers responded well to the company’s product offering during the holiday season. Shares of Lululemon were one of fashion’s outliers, trading up 0.38 percent at noontime. Holiday sales seem to suggest that the brand continues to resonate with customers, but Jefferies analyst Randal Konik had other thoughts.
Konik maintained his “sell” rating on shares of Lululemon. “Next year, we see U.S. sales and total company earnings per share declining,” the analyst said. He cited to rising competition and how growth is tapped out in the U.S., which is the brand’s largest market. Some of the younger upstarts that have scaled up and grown their customer bases include Alo Yoga and Vuori.
In addition, the 11 to 12 percent growth rate for the fourth quarter includes a 53rd week, but top-line growth was in the 6 to 7 percent range excluding the extra week. That range is the “lowest growth rate in 7 years, excluding COVID,” Konik noted, adding that it also represents “one of the slowest growth rates in the company’s history.” He isn’t sure what happens next year when the company laps that extra 53rd week, presuming sales growth fails to pick up. He also noted that inventories are on the rise, and question what will happen when inventories exceed sales growth.
Other retailers
Others that posted updates include American Eagle Outfitters Inc., Urban Outfitters Inc. and Five Below Inc.
American Eagle said comparable sales through Jan. 4 were up in the low single digits, ahead of recent guidance of positive 1 percent. The company said trends across its core American Eagle and Aerie brands were “positive.”
The retailer raised its fourth-quarter outlook, and expects operating profit of $135 million, up from prior guidance of $125 million to $130 million. Helping the boost was a comparable sales increase of 2 percent on top of last year’s 8 percent gain. It also noted that it expects total revenue to fall by 5 percent, or $85 million, because of an adverse impact from the shift in the retailer’s fiscal calendar, resulting in one less selling week.
“As a top destination for holiday shopping, we achieved record sales in December,” the retailer’s CEO Jay Schottenstein said. “We came to market with exciting new product assortments and engaging customer experiences, resulting in growth across brands and selling channels.”
Shares of American Eagle were trading in the range of down 4.4 percent on Monday.
Urban said sales for the two months ended Dec. 31, 2024, rose 10 percent versus year ago levels for the same comparable period. Total retail net sales were up 7 percent, while comparable retail net sales increased 6 percent. The comparable sales gain were driven by high single-digit positive growth in digital channel sales and low single-digit positive growth in retail store sales.
At its core nameplates, comparable retail net sales were up 10 percent at 9 percent at Anthropologie and Free People, respectively, and down 4 percent at Urban Outfitters. Urban shares were trading in the range of down 5.9 percent on Monday.
Five Below said net sales for the Nov. 3, 2024, through Jan. 4, 2025, holiday period rose 8.7 percent to $1.19 billion from $1.10 billion in the same comparable nine-week period last year. Comparable sales fell 3.2 percent.
Five Below co-founder and executive chairman Tom Vellios said the holiday results were “in line with our plans.”
The deep value discounter previously project net sales at between $1.35 billion to $1.38 billion, on a comparable sales decline of between 3 percent to 5 percent.
“Based on our holiday results and forecast for January, we now expect to deliver fourth quarter sales in the upper half of our guidance range and are reiterating our earnings per share outlook,” Vellios said. Diluted earnings per share (EPS) is expected in the range of $3.15 to $3.33, with adjusted EPS between $3.23 to $3.41. Shares of Five Below were trading in the range of down 4.6 percent.
Macy’s Inc. also provided a fourth quarter update, but the outlook wasn’t good.
The department store retailer said it expects net sales to be at, or slightly below, the low-end of its prior guidance range of $7.8 billion to $8 billion. Adjusted diluted EPS remains in-line with the prior guidance of $1.40 to $1.65. Shares of Macy’s were in the trading range of down 7.2 percent at noontime.
Macy’s chairman and CEO Tony Spring said the retailer’s “Bold New Chapter” strategy “continues to gain traction, putting us on track to achieve our second quarter of sequential comparable sales improvement.”
Macy’s is presenting on Tuesday at ICR. Spring spoke Sunday at the National Retail Federation’s “Big Show” convention and expo at the Jacob K. Javits Convention Center in Manhattan.
