Lululemon, Abercrombie lift outlook on solid holiday sales

Lululemon Athletica Inc., Abercrombie & Fitch Co. and American Eagle Outfitters Inc. raised their sales outlooks on Monday on the back of a strong holiday quarter, bucking fears of consumer weakness amid stubbornly high inflation and elevated interest rates. 

The upgrades come after what had been a more cautious tone in the retail industry. Nike Inc. said in December that it was looking for as much as $2 billion in cost savings amid a weaker sales outlook in China and around the world. Also in December, Meghan Frank, chief financial officer of Lululemon, said the company was pleased with Thanksgiving sales but wanted to be “prudent with the planning” for the remainder of the quarter, where guidance trailed Wall Street estimates.

Shoppers got a hand with their holiday season shopping from discounts and buy now, pay later plans, which helped generate record online sales, according to the latest Adobe Analytics report. 

Lululemon said it expects net revenue of $3.17 billion to $3.19 billion for the fourth fiscal quarter, up from a previous range that topped out at $3.17 billion. Lululemon shares slipped 1.1% at 9:37 a.m. as some investors expected a bigger upgrade.

The companies made guidance announcements ahead of the ICR Conference, taking place this week.

Lululemon has beaten the guidance it’s given at the ICR conference eight times out of the past nine years, and was in line once, wrote Wedbush analyst Tom Nikic in a note. “This might not be the last raise,” he said. Shoppers are making Lululemon purchases at full price, according to Nikic, boosting gross margins “even amid a highly promotional retail environment.”

Abercrombie also raised its fourth-quarter and full-year sales outlook and said better-than-expected holiday sales will help it reach its 2025 financial targets ahead of schedule. American Eagle now expects fourth-quarter revenue to rise in the low-double digits, up from a high-single digit increase previously. The holiday momentum “has continued into early January,” Chief Executive Officer Jay Schottenstein said in a statement.

Likewise, Crocs Inc. on Monday said that it expects record 2023 revenue after a “successful holiday season” that resulted in market share gains for both its namesake and HeyDude brands. Preliminary 2024 guidance is for revenue growth of 3% to 5%. 

Crocs shares jumped as much as 16% in New York trading, the most since November 2022. American Eagle stock rose as much as 6.5% while Abercrombie climbed as much as 5.6%.