The recent preliminary sales figures released by American retailers for the holiday shopping season reflect a performance generally better than market expectationsHowever, major investors on Wall Street remain skepticalThey appear to doubt the sustainability of this growth trend for retailers during the holiday season, especially with inflation re-emerging and interest rates remaining elevated well into 2025. As a result, massive sell-offs of 2024 retail stocks occurred as investors sought to lock in profits, and almost all retail stock prices plummeted under this pressure.

Retail giants like Lululemon and American Eagle raised their sales performance expectations for the holiday season, yet their stock prices displayed a lackluster responseAbercrombie & Fitch also adjusted its forecasts upward, but the increase was modest—significantly less than what in previous years might have caused a slight uptick in stock values

This time, however, it led to a striking decline in their stock prices.

On Monday, following a robust consumer response during the crucial holiday shopping season, Lululemon, Abercrombie & Fitch, and American Eagle significantly revised their fourth-quarter performance forecastsUrban Outfitters (URBN.US), a retailer offering urban lifestyle goods, also noted strong sales growth during the holiday seasonStill, negative news persisted in the retail sector, as Macy's, a retail giant, disclosed that its key quarter performance fell below market predictions.

Retailers generally projected an optimistic outlook, but stock performances told a different storyDespite many companies posting substantial drops in their stock prices, notably by more than 15% for Abercrombie, which had slightly raised its Q4 sales guide, skepticism loomed over Wall Street regarding the sustainability of their rapid growth.

Premium athletic apparel retailer Lululemon currently anticipates a sales increase of 11% to 12%, projecting revenue between $3.56 billion and $3.58 billion, surpassing its earlier forecast of $3.48 billion to $3.51 billion

Excluding an additional fiscal period added in Q4 2024, Lululemon estimates a sales growth of 6% to 7%.

The company has also updated its profit expectationsLululemon's management now projects earnings per share for the fourth quarter to be between $5.81 and $5.85, an increase from the prior forecast of $5.56 to $5.64. The expected gross margin is anticipated to rise by 0.3 percentage points, in contrast to the previous forecast, which anticipated a decrease of 0.2 to 0.3 percentage points.

“Our products have seen enthusiastic reception from customers during the holiday shopping season, allowing us to raise our fourth-quarter performance outlook,” stated Lululemon's Chief Financial Officer, Meghan Frank, in an announcement.

On Monday, Lululemon's stock unexpectedly dipped during trading hours but ultimately closed nearly 1% upNonetheless, the uplifting effect of positive performance guidance typically reflected in stock prices has been notably short-lived

This reflects a broader sentiment among Wall Street analysts who believe that Lululemon's rapid growth may not be sustainable, particularly amid sustained inflationary pressures and the potential for the Federal Reserve to maintain high-interest rates for an extended period, thereby causing a significant reduction in discretionary spending among middle-income consumersThese households, alongside lower-income families, are being compelled to prioritize essential goods over non-essential items.

Simultaneously, Abercrombie expressed a slightly optimistic outlook for its holiday season resultsThis clothing retailer raised its net sales growth expectations to 7% to 8%, up from an earlier forecast of 5% to 7%.

Furthermore, Abercrombie now anticipates its yearly sales to grow by 15%, compared to an earlier forecast of 14% to 15% for that periodWhile the outlook appears optimistic, investors note a stark contrast between this year's expectations and the previous year's impressive growth of 21% in holiday sales.

Investors who support Abercrombie might argue that as the company's business matures, achieving performance growth compared to last year becomes increasingly challenging, making the slowdown in growth inevitable

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However, after approximately two years of explosive stock price growth, some investors might be shifting to a more bearish perspective.

Abercrombie's annual sales prediction is in line with last year; however, last year saw a substantial sales increase of 16%. In an official press release, Abercrombie's CEO, Fran Horowitz, stated that the company would prioritize profit enhancement rather than merely focusing on sales figures to “drive long-term shareholder value.”

Horowitz remarked, “Having achieved double-digit growth in both sales and profits over the past two expected years, I remain as confident as ever in the strength of our brand and operating model, bolstered by our established capabilitiesIn 2025, we will continue to drive sustainable profit growth by implementing our strategic plan, focusing on winning and retaining customers globallyWe aim to leverage our healthy profit margins and balance sheet to grow operating profits and earnings per share faster than sales.”

These retailers shared their latest performance expectations ahead of the annual International Council of Retailers (ICR) conference in Orlando

Several of the top retailers in America disclosed their initial holiday season sales figures leading up to the 2025 ICR and engaged with investors and analysts regarding their latest performance forecastsThis conference attracts some of Wall Street's largest commercial banks, law firms, private equity firms, and top investment institutions, often setting the tone for consumer trading decisions and overall retailer performance for the year ahead.

Notably, Macy's, a traditional retail heavyweight, also announced preliminary fourth-quarter performance including holiday season figures, but unlike some of its competitors, it lacked positive news to shareThe department store currently expects sales to meet or slightly fall below its previously stated range of $7.8 billion to $8 billionFollowing this announcement, its stock dropped by over 8%.

Urban Outfitters shared its initial figures encompassing the holiday shopping season, predicting a 10% year-on-year increase in net sales for the two months ending December 31. Strong online sales notably bolstered its comparable retail sales, anticipated to grow by 6%.

However, Urban's same-store sales unexpectedly fell by 4%, with the brand underperforming compared to its subsidiaries, Anthropologie and Free People, which saw same-store sales rises of 10% and 9%, respectively.

Meanwhile, Urban's rental service, Nuuly, experienced a significant 55% sales increase, driven by a 53% rise in active user numbers

Nonetheless, Urban Outfitters' stock still dipped 2% at the close of trading on Monday.

American Eagle also raised its fourth-quarter performance expectations, projecting operating profits of around $135 million, above the previously anticipated $125 millionThe company reported that comparable sales growth for the quarter as of January 4 was in the low single digits, contrasting with earlier expectations of growth below 1%.

However, the company has indicated that due to a change in its fiscal calendar, total sales are expected to decline by approximately 5%, as this fiscal year is one week shorter than the previous yearThis timing shift is projected to impact sales by $85 million in the fourth quarter and affect annual sales by $60 millionAmerican Eagle's stock also fell approximately 4% on Monday.

While it is likely that holiday season sales outperformed expectations, the outlook for discretionary spending remains bleak

Overall, the American holiday shopping season of November to December 2024, covering Thanksgiving, Black Friday, Christmas, and the New Year's frenzy, did not mirror the explosive sales figures typical in the post-pandemic eraThe National Retail Federation expects this latest holiday shopping season to see sales growth of 2.5% to 3.5%. After accounting for inflation, actual growth is expected to be negligible.

Nonetheless, some preliminary statistics filter through, suggesting that while the overall performance of the holiday shopping season in America was not as robust as in previous years, it is likely to exceed market expectations slightly.

According to Mastercard’s SpendingPulse data, U.Sretail sales during the holiday shopping season (excluding automobile sales) grew by 3.8% from November 1 to December 24. This preliminary figure takes into account sales across various payment types, both in-store and online.

Recent statistics from Adobe showed an unexpected 9% growth in U.S

e-commerce spending during the 2024 holiday shopping season, totaling a record $241 billion.

Adobe's data indicated that during the final two months of 2024, over half of online consumer spending was directed towards purchasing electronics, clothing, and home goodsIn comparison, spending on groceries and cosmetics exhibited the highest year-on-year growth rates.

Adobe's analysis team noted, “The substantial discounts seen during the 2024 holiday shopping season attracted consumers who are increasingly price-sensitive.” The company added that product sales volumes were proportional to discount levelsOverall, Adobe reported that the record online sales during the American holiday shopping season were driven primarily by increased demand rather than rising prices, which serves as a positive indicator for the U.Seconomy.

Since the beginning of 2024, while inflation rates in the U.S

have shown signs of slowing, they remain on an upward trajectoryIn addition, the persistent high-interest rates since 2022 have compelled many lower-income consumers to drastically reduce spending, prioritizing essential items like food and drinking waterThe cumulative effect of years of rising prices has placed many retailers focused on non-essential goods into a challenging position of weakened demand.

In Western countries, the term "holiday shopping season" refers to the final two months of the year, November and December, encapsulating significant shopping holidays such as Thanksgiving, Black Friday, and ChristmasThis period features critical retail promotions and is vital for e-commerce giants and retailers like Walmart and Target, marking the most significant sales season of the year while also being crucial to the growth of the U.SGDPIn GDP measurement, 70% to 80% of segmented statistics are closely tied to consumer spending.

Undoubtedly, sustained strong consumer spending in the U.S