ORLANDO, Florida — Lululemon and Abercrombie & Fitch raised their fourth-quarter outlook on Monday after noting strong customer response during the all-important holiday season.
Lululemon’s new outlook has gone down well with investors, sending shares soaring in early trading. But Abercrombie shares fell about 17% as investors wonder if they will its rapid growth is coming to an end.
Lululemon now expects sales to grow between 11% and 12% to between $3.56 billion and $3.58 billion, up from a previous range of $3.48 billion to $3.51 billion.
Excluding the extra fiscal week the company will have in the fourth quarter of 2024, Lululemon expects sales to grow between 6% and 7%.
The company also raised its profit outlook. Lululemon now expects fourth-quarter earnings per share to be between $5.81 and $5.85, compared to its previous forecast of between $5.56 and $5.64. It expects gross margins to increase by 0.3 percentage points after previously forecasting that they would fall between 0.2 and 0.3 percentage points.
“During the holiday season, our guests responded well to our product offerings, which allowed us to increase our guidance for the fourth quarter,” 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 outlook for net sales growth to a range of between 7% and 8%, compared with previous guidance of between 5% and 7%.
Abercrombie now expects full-year sales to rise 15%. Sales were previously expected to rise between 14% and 15% in the period.
The outlook is a far cry from the blockbuster numbers Abercrombie posted last year, when holiday sales jumped a whopping 21% compared to a year ago.
Investors who back Abercrombie would say it makes sense to see the company’s growth start to slow as it matures and passes tougher year-over-year comparisons, but after about two years of explosive stock growth, some may turn bearish.
Still, Abercrombie’s overall annual sales are close to what it reported last year, when revenue rose 16%.
In a press release, Abercrombie CEO Fran Horowitz signaled that the company will be more focused on growing profits than sales going forward as it seeks to “drive long-term shareholder value.”
“After an expected two years of double-digit top- and bottom-line growth, I am 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,” Horowitz said. “In 2025, we will seek to continue sustainable, profitable growth by executing on our plans to acquire and retain customers around the world. Our goal is to leverage our healthy margin structure and balance sheet to grow operating income dollars and earnings per share at rates faster than sales.”
Retailers released their guidance ahead of the annual ICR conference in Orlando when some of America’s top retailers are expected to report early holiday results and meet with investors and analysts about their performance. The conference brings together major banks, law firms, private equity firms and Wall Street investors, and is known to set the tone for consumer deals and retail performance at the start of the year.
Macy’swhich is expected to present at the conference, also announced initial results, but didn’t have as good news to share as some of its competitors. The department store now expects sales to be at or slightly below its previously issued range of between $7.8 billion and $8.0 billion. Its shares fell more than 6% in early trading.
Urban Outfitters also reported early holiday results and said net sales for the two months ended Dec. 31 were up 10% compared with a year ago. Comparable retail segment sales increased 6%, driven by strong online sales.
Urban’s namesake banner posted a 4% decline in comparable sales as the chain continued to underperform Anthropologie and Free People, where comparable sales rose 10% and 9%, respectively.
Meanwhile, sales rose 55% at Urban’s rental service Nuuly, driven by a 53% increase in average active subscribers.
Shares fell nearly 5% in early trading.
american eagle also raised its outlook for the fourth quarter and said it expects operating profit of about $135 million, up from previous guidance of $125 million. It said comparable sales for the quarter to January 4 rose by low single digits, compared with previous guidance of 1%.
Shares fell about 4% in early trading.
Overall, the holiday shopping season was not expected to produce the drop in numbers that has become common after the Covid-19 pandemic. The National Retail Federation said it expects sales growth between 2.5% and 3.5%. When inflation is taken into account, real growth was is expected to be minimal.
However, some early readings signaled that the holiday season could be a little better than expected.
Retail sales for the US holiday season, excluding auto sales, increased by 3.8% compared to the previous year between Nov. 1 and Dec. 24, according to Mastercard SpendingPulse, which measures in-store and online sales across payment types.
