Combination showing store signs for Abercrombie & Fitch and Lululemon.
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Abercrombie & Fitch, lululemon and American Eagle Outfitters All raised their outlook for the fiscal fourth quarter on Monday, saying they attracted customers looking for gifts and holiday items for themselves in November and December.
However, Wall Street greeted the news with varying levels of enthusiasm. Shares of Abercrombie and American Eagle rose about 6% on Monday. Lululemon shares barely moved on Monday after investors weighed the higher forecast with concerns that the activewear retailer could face tougher competition in the coming months.
Urban Outfitters shares also rose in extended trading after the retailer announced strong holiday quarter sales weeks before its earnings report.
The companies shared the latest quarterly forecasts ahead of meetings with investors and analysts at the ICR Conference this week in Orlando. Other retailers are also expected to release holiday updates during the three-day event.
So far, holiday spending estimates have struck a positive note. Online sales rose 4.9% year over year to $222.1 billion in November and December, according to Adobe Analytics. Holiday retail sales, excluding auto sales, grew 3.1% in the U.S. year over year, according to preliminary data from Mastercard SpendingPulse, which tracks in-store and online retail sales across all types payment.
However, it’s still unclear which retailers captured the most of those dollars spent by holiday shoppers.
American Eagle looks like a winner. He said quarter-to-date revenue was up about 8% as of Dec. 30, with sales of its namesake brand rising in the high single digits and Aerie rising 10%. He said he expects both revenue and operating profit to be better than expected for the fiscal fourth quarter.
The company said fiscal fourth-quarter revenue will increase by double digits and operating profit is expected to be approximately $130 million, compared to previous guidance of $105 million to $115 million.
American Eagle CEO Jay Schottenstein said in a news release that the retailer’s momentum “has continued into early January.”
Mall rival Abercrombie said it expects net sales to rise in the mid-teens and its operating margin to reach around 15% for the fiscal fourth quarter. That compares with its previous expectations for net sales to grow in the low double digits and for operating margin to be in the range of 12% to 14%. He raised his full-year fiscal results to correspond.
In a press release, Abercrombie CEO Fran Horowitz said Abercrombie & Fitch’s women’s business is expected to reach its highest sales ever in the fourth quarter. In addition, she said, its men’s business has grown and its Hollister brand is on track to grow year over year and earn higher profits as the company offers better merchandise and manages its inventory accurately.
Lululemon made more modest adjustments to its fourth-quarter forecast. He said he expects net income to be in the range of $3.17 billion to $3.19 billion for the fourth quarter. It had previously anticipated a range of between $3.135 and $3.17 billion. Diluted earnings per share are also expected to reach a higher level, in the range of $4.96 to $5.00 for the quarter, compared to the previous range of $4.85 to $4.93.
Retail earnings season begins in mid-February, with names like Walmart, Aim and House deposit. Abercrombie, American Eagle and Lululemon are expected to report full holiday results in March.
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