Wall Street DESTROYS Retail Stocks After Posting Better than Expected Numbers—Wait, What?!

Retailers rolled out their holiday sales updates this week, and if you’re looking for Wall Street’s reaction, it’s somewhere between “meh” and “McKayla is not impressed”. Despite a handful of big names like Lululemon, Abercrombie & Fitch, and American Eagle raising their guidance for the quarter, their stocks still got tossed into the red. Because as it turns out, exceeding expectations can still turn into a swift kick in the “valuation”. 

Take Lululemon, for instance. The athleisure juggernaut upped its sales and profit guidance, with CFO Meghan Frank patting herself on the back for a solid holiday season. But apparently, the market expected more than a 0.3 percentage point gross margin boost. Shares scraped out a tiny gain before the reality of Wall Street’s apathy set in. Simply put, this isn’t 2020 anymore, and no one’s paying Peloton-era premiums for stretchy pants, no matter how buttery soft they might be.

Additionally, Abercrombie & Fitch, couldn’t quite recapture its post pandemic mind-bending growth. Sure, it raised its holiday-quarter growth forecast from “decent” to “slightly better than decent,” but when you’re lapping last year’s 21% holiday sales explosion, a 7-8% increase feels like being second loser. As a result investors yeeted the stock -15%, presumably in disgust. 

(Source: CNBC) 

What’s more is that American Eagle and Macy’s also learned the hard way that Wall Street has zero chill. Even after bumping up its operating profit forecast and reporting a slight bump in comparable sales, investors took one look at American Eagle fine print—a revenue decline thanks to a shorter fiscal calendar—and dumped the stock -4.5%. 

Macy’s on the other hand didn’t get the memo about good news behind mandatory. The department store chain announced that its holiday sales are tracking below expectations, which, honestly, isn’t shocking to anyone who’s seen the state of the average mall lately. Wall Street’s response? An 8% stock drop to add to the department store's pathetic descent. 

(Source: Wall Street Journal) 

Urban Outfitters, meanwhile, tried to make a case for optimism with a 10% holiday sales jump. Anthropologie and Free People carried the team, while the Urban banner continued to underperform. But the real MVP? Nuuly, the company’s rental service, which saw a 55% sales surge. Buuuut, too bad the market didn’t care. Shares still dipped because, apparently, no one’s impressed by the idea of renting clothes when the economy feels like it’s one bad CPI report away from a recession.

The takeaway to all of this? Well, the holiday season wasn’t a disaster, but it also wasn’t the post-COVID spending spree retailers had grown accustomed to. MasterCard SpendingPulse estimates holiday retail sales rose 3.8% year-over-year, but inflation sucked all the fun out of that number, leaving “real” growth looking pretty anemic.

(Source: Reuters) 

Meaning Wall Street’s problem isn’t that retailers underperformed—it’s that they didn’t overperform. The market is fresh out of patience for incremental improvements and is demanding blowout numbers like it’s still 2021. Anything less gets penalized, often harshly, because apparently, a decade of low-interest-rate-fueled market euphoria wasn’t enough to temper the Street’s appetite for miracles.

So, here we are. Retailers are heading into the ICR conference this week to schmooze with investors and analysts, hoping to spin their decent-but-not-great results into something resembling optimism.

(Source: Giphy) 

But unless someone can convince Wall Street that holiday sales were secretly amazing, expect the mood to stay “dissatisfied”. After all, nothing says “new year, same market” like punishing companies for doing exactly what they said they’d do. In the meantime, keep an eye on this story going forward and as always, stay safe and stay frosty, friends! Until next time…

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Stocks.News does not hold positions in companies mentioned in the article.