Retail stocks came under pressure Monday after Lululemon Athletica and Macy's warned of weaker-than-expected fourth-quarter performances. Meanwhile, Abercrombie & Fitch shares soared after guiding above expectations.
Lululemon stock plummeted more than 8% in afternoon trade. Macy's shares tanked more than 7%. Abercrombie & Fitch jumped more than 10%.
Vancouver, British Columbia-based Lululemon warned its Q4 gross margin would decline, pressured by cost increases and cautious consumer spending. At the same time, the fitness clothing retailer raised its revenue guidance and tightened the range of its earnings guidance.
Amid high inflation, consumers have cut back on discretionary purchases, forcing Lululemon to discount more to tame swelling inventories.
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Management now projects earnings between $4.22 and $4.27 per share, with the midpoint roughly in line with prior guidance for $4.20 to $4.30. Revenue is projected at $2.66 billion to $2.70 billion, vs. initial guidance of $2.61 billion to $2.66 billion. FactSet shows the analyst earnings consensus at $4.30 a share and a $2.67 billion revenue target.
Meanwhile, Macy's said Q4 revenue would come in near the low-end of expectations, previously projected at $8.16 billion to $8.4 billion. Macy's EPS guidance remained unchanged at $1.47 to $1.67. Gross margin guidance also remained unchanged. Analysts see earnings at $1.60 per share and revenue down about 4% to $8.28 billion.
"Black Friday/Cyber Monday sales were in line with our expectations, while the week leading up to and following Christmas were ahead," said Macy's CEO Jeff Gennette in a statement. "However, the lulls of the nonpeak holiday weeks were deeper than anticipated."
Also early Monday, Abercrombie & Fitch raised its fourth-quarter margin guidance to a range of 6% to 8%, above earlier projections for 5% to 7%. Management upgraded its net sales estimate to 1% to 2% growth, vs. prior expectations for a 2% to 4% decline. Analysts put Abercrombie earnings down almost 40% at 70 cents a share. Revenue is projected down not quite 2%, to $1.14 billion.
Women's apparel chain Chico's FAS also weighed in. The Fort Myers, Fla.-based outfit guided sales expectations to between $505 million to $515 million, vs. prior guidance of $535 million to $555 million. Earnings per share guidance is flat to a two-cent loss. Prior guidance saw earnings of seven to 10 cents per share.
Chico's shares shed more than 9% in Monday afternoon action.
Lululemon, Macy's Share Consolidating
Monday's loss drove Lululemon shares well below technical support in a five-week consolidation. The stock gave up 18% in 2022. Macy's stock fell back to test 200-day support in a six-week cup base. Shares are up around 40% from a late September low, after losing 23% in 2022.
Among department stores, Nordstrom slumped 1.7% in Monday afternoon trade. Kohl's fell nearly 2%.
Retail and apparel stocks other than Lululemon generally recovered from early selling pressure on Monday. Under Armour and Ross Stores pared losses to less than 1%. Gap reversed to a 2.8% gain. Nike shed early losses and rose 1.1%.
