Ho-hum holiday: Retail’s early results show modest growth in critical shopping season
Early holiday sales results released Monday painted a picture of a solid but unspectacular season, with consumer spending trends revealing clear winners and losers in a competitive retail landscape.
Athleisure giant Lululemon set a cautious tone, stating it expects fourth-quarter revenue and earnings to be “toward the high end” of its prior guidance, with revenue near $3.60 billion and EPS close to $4.76. The company, which is navigating a CEO transition and a proxy battle, saw shares rise modestly. CFO Meghan Frank reiterated the company's focus on "executing our action plan to drive improvement in our U.S. business," acknowledging a season marked by strategic discounting to clear inventory.
Conversely, Abercrombie & Fitch shares plunged over 18% after the retailer trimmed the high end of its full-year guidance, despite reporting "record" quarter-to-date sales. The company now expects sales growth of "at least 6%" versus a prior 6%-7% range and slightly lowered its operating margin outlook. The downward revision overshadowed CEO Fran Horowitz’s statement on delivering "balanced growth across our regions, brands, and channels."
Other retailers signaled a tepid environment. Birkenstock projected quarterly sales growth of 11%, while thrift chain Savers Value Village reported an 8.4% sales increase but only reaffirmed, rather than raised, its full-year profit outlook.
Bright Spots Emerge with Value and Focused Assortments
Against this backdrop, several retailers bucked the trend by raising guidance on the back of strong performance.
American Eagle Outfitters reported "record" December sales, with quarter-to-date comparable sales up in the high single digits. Its Aerie intimates line was a standout, with comps soaring in the "low twenties." As a result, the company raised its Q4 operating income forecast to $167-$170 million from $155-$160 million. Despite the positive news, its stock fell 9% Monday.
Discount retailer Five Below delivered perhaps the strongest report, with quarter-to-date sales surging 23.2% and comparable sales up 14.5%. The company significantly raised its Q4 outlook, now expecting sales around $1.71 billion (up from $1.58-$1.61 billion) and nearly doubling its comp sales guidance to 14%. CEO Winnie Park credited a "maniacal focus on the customer" and "amazing, trend-right products at exceptional value" for the success.
A Season of Selective Spending
The bifurcated results align with analyst expectations for a holiday season characterized by selective consumer spending rather than broad-based exuberance. The National Retail Federation had forecast November-December sales growth of 3.7% to 4.2%. However, when adjusted for higher prices driven by tariffs, real volume growth appears muted.
The early reports, released ahead of the annual ICR conference, underscore a retail environment where value proposition, precise merchandising, and brand resonance are critical differentiators. While the overall consumer pulse remains steady, the data confirms that retailers must now compete harder for each discretionary dollar in a market increasingly divided between those meeting the moment and those falling behind.
