Unremarkable Holiday Season: Early Reports Indicate Slight Increase in Shopping Activity
The holiday shopping season, a key period for retailers, delivered steady but not groundbreaking results according to early figures. Some companies reported that their performance during the holidays was at the upper end of their prior estimates, while others shared less promising figures.
One prominent athletic apparel brand, amidst changes in leadership and potential conflict with its founder, announced expectations for their holiday quarter to be at the higher end of their prior forecast. A well-known shoe manufacturer and a thrift store chain also reported unspectacular early results for the holiday season. In contrast, a popular teen clothing store and a discount retailer saw better-than-expected results and subsequently raised their respective estimates.
The athletic apparel brand expects their fourth quarter revenue to hover around $3.60 billion, with earnings close to $4.76 per share. These numbers align with their upper-end estimates shared during their fiscal third-quarter earnings announcement in December. The company did not modify its previous guidance for gross margin, effective tax rate, or administrative expenses.
Aggressive Discounting and Holiday Performance
The outgoing CEO of the athletic apparel brand revealed that heavy discounting during the Thanksgiving holiday period drove demand. However, once the holiday shopping period ended, sales trends began to slow. This company, like many high-end brands, has traditionally been selective with discounts. However, recent quarters have seen a more liberal use of discounts to clear out old stock and less popular items.
During the fiscal third quarter, the company experienced a 2.9 percentage point drop in margins, primarily due to higher tariffs and increased markdowns.
Record Sales But Reduced Guidance
In an unexpected turn, a retail brand known for its trendy teen apparel saw a nearly 17% drop in shares in premarket trading, despite reporting record quarter-to-date sales. This drop came after the company decreased its guidance range. Full-year sales growth is now expected to be at least 6%, a decrease from the previous estimate of 6% to 7%. The operating margin is also expected to be around 13%, a reduction from the previous range of 13% to 13.5%. The estimated earnings per share were also slightly adjusted.
Unmet Expectations and Growth
The shoe manufacturer, which didn't provide specific holiday-quarter guidance last year, expects sales for the quarter ending December 31 to increase by 11% to €402 million ($470 million). This news seemed to disappoint investors, as shares fell about 3% in premarket trading.
The thrift store chain reported an 8.4% growth in sales during its holiday quarter, with comparable sales up 5.4%, not counting an extra week in their calendar. Despite this relatively strong growth, the company merely reaffirmed its fiscal 2025 net income and adjusted EBITDA outlooks.
Exceeding Expectations
On a brighter note, another popular teen clothing store reported a successful holiday quarter, exceeding expectations. Comparable sales were up in the high single digits and sales trends were positive across all brands and channels. Based on this record season, the company increased its fourth quarter operating income estimate. The company's namesake brand saw single-digit percentage growth, while its intimate apparel line recorded a rise in the low twenties.
A discount retailer also reported strong holiday performance, with quarter-to-date sales increasing by 23.2% and comparable sales up by 14.5%. The company is now expecting fiscal fourth-quarter sales to be around $1.71 billion, a significant increase from previous estimates. The company also adjusted its earnings per share guidance upwards.
The early results, announced ahead of a significant retail conference in Orlando, Florida, reflect what many analysts had predicted for the holiday shopping season. Some companies showed strong growth, but overall, the expectation was for solid results without massive gains in consumer spending.
Earlier estimates had predicted retail sales in November and December to increase between 3.7% and 4.2% compared to the previous year. However, when accounting for higher prices due to tariffs, some experts expect volume growth to be largely flat.