ORLANDO, Fla. – Lululemon And Abercrombie & Fitch on Monday raised their fourth-quarter forecasts after seeing a strong response from shoppers during the key holiday season.
Lululemon's new outlook was well received by investors and caused shares to trend higher in early trading. But Abercrombie's shares fell about 17% as investors wonder whether its rapid growth will soon come to an end.
Lululemon now expects revenue to grow between 11% and 12% to $3.56 billion to $3.58 billion, up from the previous range of $3.48 billion to $3.51 billion.
Excluding an additional week of business the company will have in the fourth quarter of 2024, Lululemon expects revenue to grow between 6% and 7%.
The company also raised its earnings outlook. Lululemon now forecasts fourth-quarter earnings per share between $5.81 and $5.85, compared to its previous forecast of $5.56 to $5.64. The company expects gross margins to increase by 0.3 percentage points, after previously forecasting a decline of between 0.2 and 0.3 percentage points.
“During the holiday season, our guests responded well to our product offering, allowing us to increase our fourth quarter guidance,” Chief Financial Officer Meghan Frank said in a statement.
Meanwhile, Abercrombie also expects its holiday quarter to be slightly better than expected. The apparel company raised its net sales growth outlook to a range of 7% to 8%, compared to its previous forecast of 5% to 7%.
Abercrombie now expects full-year sales growth of 15%. Previously, an increase in sales of between 14 and 15% was expected for this period.
The outlook is a far cry from the blockbuster numbers Abercrombie posted last year, when holiday sales rose a staggering 21% compared to the same period last year.
Investors who are bullish on Abercrombie would say it makes sense for the company's growth to slow as it matures and leaves behind tougher comparisons than the year-ago period, but after about two years of explosive stock growth, some might become pessimistic.
Still, Abercrombie's full-year sales forecast is close to last year's forecast, when sales rose 16%.
In a press release, Abercrombie CEO Fran Horowitz signaled that the company will focus more on growing profits than sales as it seeks to “increase long-term shareholder value.”
“After an expected two years of double-digit revenue and profit growth, I remain as confident as ever in the strength of our brands and operating model as we move forward, supported by the outstanding capabilities we have built,” said Horowitz. “In 2025, we will seek to continue sustainable, profitable growth by executing our strategies to attract and retain customers around the world. Our goal is to leverage our healthy margin structure and balance sheet to grow operating income and earnings per share prices faster than sales.
The retailers released their forecasts ahead of the annual ICR conference in Orlando, where some of the best-known U.S. retailers are expected to report early holiday results and meet with investors and analysts about their performance. The conference brings together Wall Street's largest banks, law firms, private equity firms and investors and is known to set the tone for consumer business and retailer performance as the year begins.
Macy'swhich is expected to present at the conference, also released initial results but, unlike some of its competitors, had no good news to share. The department store now expects sales to be in the aforementioned range of $7.8 billion to $8.0 billion or slightly lower. Its shares fell more than 6% in early trading.
Urban Outfitters also released early holiday results and said net sales for the two months ended Dec. 31 rose 10% compared to the same period last year. Comparable retail segment sales rose 6%, driven by strong online sales.
Urban's namesake banner posted a 4% comparable sales decline as the chain continued to lag behind Anthropologie and Free People, where comparable sales rose 10% and 9%, respectively.
Meanwhile, sales at Urban's rental service Nuuly rose 55%, driven by a 53% increase in average active subscribers.
Shares fell nearly 5% in early trading.
American eagle The company also raised its fourth-quarter outlook, saying it expects operating profit of about $135 million, above the previous forecast of $125 million. It said comparable sales for the quarter ended Jan. 4 rose in the low single digits, compared with its previous forecast of a 1% increase.
Shares fell about 4% in early trading.
Overall, the holiday shopping season was not expected to produce the overwhelming numbers that have been common in the wake of the Covid-19 pandemic. The National Retail Federation said it expected sales to grow between 2.5% and 3.5%. Taking inflation into account, minimal real growth was expected.
Still, some early data suggests the holiday season may be a little better than expected.
According to Mastercard SpendingPulse, which measures in-store and online sales across all payment types, U.S. holiday season retail sales (excluding automotive sales) increased 3.8% year-over-year between Nov. 1 and Dec. 24.
Comments are closed.