Retail\u2019s biggest winners during\u00a0first-quarter earnings\u00a0aren\u2019t thriving because consumers are suddenly spending more on discretionary goods \u2014 it\u2019s because they\u2019re executing well and cash-strapped shoppers are choosing them over competitors.\u00a0<\/p>\n
If there\u2019s one takeaway from results posted by the largest U.S. retailers over the last few weeks, it\u2019s that shoppers are still spending \u2014 but being\u00a0far more selective\u00a0about where.<\/p>\n
Feeling the brunt of sticky inflation, high interest rates and an economy that\u00a0feels tougher\u00a0than it may actually be, consumers are prioritizing purchases that have the right combination of value, convenience and fun.<\/p>\n
Companies like\u00a0Abercrombie & Fitch,\u00a0TJX Companies\u00a0and\u00a0Gap\u00a0impressed Wall Street\u00a0with their results, while others like\u00a0Kohl\u2019s,\u00a0American Eagle\u00a0and\u00a0Target\u00a0disappointed.<\/p>\n
Take Gap and\u00a0Foot Locker\u00a0\u2014 two unlikely winners that posted results on Thursday. Both retailers are in the midst of ambitious turnaround plans and are performing better than expected because of new strategies they\u2019ve implemented.\u00a0<\/p>\n
Gap\u00a0posted positive comparable sales\u00a0for all four of its brands \u2014 Athleta, Old Navy, Banana Republic and its namesake banner \u2014 for the first time in \u201cmany years,\u201d beating Wall Street\u2019s expectations across the board, the company said.\u00a0<\/p>\n
For years, Gap had been losing market share to buzzy competitors. But\u00a0under new CEO Richard Dickson, the marketing guru credited with reviving the Barbie franchise, the apparel chain has focused on financial rigor, brand storytelling and product development. In under a year, Gap\u2019s sales and profits have meaningfully improved, and its brands are beginning to be part of the cultural conversation again.<\/p>\n
A few weeks ago, actor Anne Hathaway went to a Bulgari party wearing a white Gap shirt dress that had been designed by the company\u2019s new creative director, Zac Posen. Critically, Gap dropped the $158 dress to consumers, and it sold out within hours. This combination of marketing and exclusive product drops is what Gap had long been lacking, and what competitors had already been doing.\u00a0<\/p>\n
Foot Locker had declined over the last couple of years, but with the right combination of new strategies and a little bit of luck, its turnaround is\u00a0showing signs of life.\u00a0<\/p>\n
Under CEO Mary Dillon, Foot Locker has\u00a0worked to change its stores, where it does more than 80% of its sales.\u00a0<\/strong>It has tried to create not only a better shopping experience for consumers but also a better place for its critical brand partners.<\/p>\n Instead of two walls of shoes with competing brands mixed together, Foot Locker is changing its fleet so the brands have their own unique displays. Its new \u201cstore of the future\u201d concept at a New Jersey mall that brings that strategy to life has become its best performing store in North America in just a few weeks, Dillon told CNBC, adding that brands are thrilled with the new design.\u00a0<\/p>\n The shift couldn\u2019t have come at a better time. Years into Nike\u2019s strategy to cut out wholesalers and sell directly to consumers, the retailer is realizing it went too far and is\u00a0now changing course.<\/p>\n With refreshed stores and better product displays, consumers are converting more, too, and paying full price \u2014 even Foot Locker\u2019s lower-income shopper.\u00a0<\/p>\n \u201cOur consumer \u2026 this is a category that is very important to them. So when people have discretionary income, it may be limited, but you\u2019re gonna prioritize where you spend it, right?\u201d said Dillon. \u201cWe\u2019re proving that people are willing to spend full price, but you have to have the right products and serve it up in a way that makes it enticing, right? So that\u2019s where the whole customer experience really matters.\u201d\u00a0<\/p>\n Elsewhere,\u00a0Dick\u2019s Sporting Goods\u00a0posted a solid first-quarter report\u00a0Wednesday, as executives said average selling prices and transactions rose and that they saw no signs of consumers trading down for cheaper options. That may not mean shoppers are spending more broadly, though: Dick\u2019s has long been considered a best-in-class operator that offers a solid shopping experience, meaning it can win even when consumers are picky with their spending.<\/p>\n Two retailers that didn\u2019t have great quarters \u2014\u00a0American Eagle\u00a0and\u00a0Kohl\u2019s\u00a0\u2014 tell a story of missing out on trends or executing poorly.\u00a0<\/p>\n American Eagle handily beat earnings estimates thanks to a new strategy\u00a0designed to boost profitable growth, but it fell short on revenue and\u00a0issued cautious guidance\u00a0that was slightly below Wall Street\u2019s expectations.\u00a0<\/p>\n American Eagle president and executive creative director Jennifer Foyle told CNBC that the brand is working to cut out items that aren\u2019t landing with shoppers and dig down into the ones that are. She said the retailer was overly focused on jeggings in the past but now, low-rise, baggy fits are in.\u00a0<\/p>\n During a store visit at the American Dream mall in New Jersey on Thursday, an associate told CNBC that the location didn\u2019t have the low-rise, baggy fit in-stores, and they were only available online. Meanwhile, there was a wall of jeggings.\u00a0Still, denim was a strong performer for the company during the quarter, and it had a variety of other styles that resonated with customers at the location, the company said.<\/p>\n Denim is having a moment with shoppers. Search levels for denim are hitting peaks in a 20-year data set, particularly for categories like tops and dresses, according to a Morgan Stanley research note.\u00a0<\/p>\n Kohl\u2019s is missing the mark in a far more meaningful way. The retailer\u00a0posted dismal numbers\u00a0on Thursday, as both earnings and revenue fell well short of expectations. It cut its full-year forecast and its shares plunged more than 20%, the stock\u2019s biggest single-day percentage decline ever.<\/p>\n The weak results illustrated a challenge the retailer is still contending with: Keeping up with trends and staying relevant.\u00a0<\/p>\n CEO Tom Kingsbury told CNBC he expects the \u201chead-to-toe\u201d denim trend to play a role in the back half of the year, but it could already be out of style by the time Kohl\u2019s gets around to adding the clothing items to its shelves.<\/p>\n \u201cDenim is OK business for us. I mean it\u2019s really not the most important time for denim,\u201d said Kingsbury. \u201cWe\u2019re selling shorts and tees. And more, you know, warm weather product.\u201d\u00a0<\/p>\n Gap, one of the longtime denim leaders, didn\u2019t seem to be concerned about denim going out of favor because the weather is warmer. CEO Dickson said the company is getting ready to launch its \u201cexclusive lightweight denim fabric\u201d dubbed \u201cUltra Soft\u201d in time for the summer.<\/p>\n Failing to chase trends has been an ongoing issue for the aging department store Kohl\u2019s. Kingsbury told CNBC in March that Kohl\u2019s used to buy product for the juniors department catering to teen girls \u2014 one of the most trend-driven areas of its stores \u2014 12 to 14 months in advance. When the apparel hit the sales floor, it was \u201cdead on arrival.\u201d<\/p>\n In an age where viral TikTok videos dictate the life and death of trends, it\u2019s more important than ever for retailers to stay on top of what\u2019s working with customers and what isn\u2019t. They\u2019re not just competing with legacy players, they\u2019re also vying for customers with innovative yet controversial upstarts like Chinese-linked Shein, which can go from an idea to an online product in a matter of weeks.<\/p>\n That\u2019s a far cry from the lead times at\u00a0Under Armour, where it currently takes about 18 months to get a product from an idea to a showroom floor. During an earnings call with analysts on May 16, CEO Kevin Plank called the system \u201cjust plain uncompetitive in the 2024 landscape\u201d as he laid out a plan to\u00a0streamline the process.\u00a0<\/p>\n Meanwhile, Abercrombie & Fitch posted another stellar set of results, even as it begins to lap tougher comparisons. It has posted torrid growth in part because the company is responsive to its customers and a has nimble supply chain that has allowed it to chase trends quickly and efficiently.\u00a0<\/p>\n It posted its strongest first quarter in history, and now expects sales to grow 10% in fiscal 2024, up from previous guidance of between 4% and 6%.\u00a0<\/p>\n CEO Fran Horowitz told CNBC that low-rise, baggy jeans are also uber-popular with its customers. During a recent visit by CNBC to its Hollister store just a short walk from American Eagle\u2019s outpost, plenty of those style of jeans were on display for shoppers as soon as they walked into the store.<\/p>\n<\/p>\n Retail\u2019s biggest winners during\u00a0first-quarter earnings\u00a0aren\u2019t thriving because consumers are suddenly spending more on discretionary goods \u2014 it\u2019s because they\u2019re executing well and cash-strapped shoppers are choosing them over competitors.\u00a0 If there\u2019s one takeaway from results posted by the largest U.S. retailers over the last few weeks, it\u2019s that shoppers are still spending \u2014 but being\u00a0far […]<\/p>\n","protected":false},"author":0,"featured_media":5130,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-5129","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/5129","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=5129"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/5129\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/5130"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=5129"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=5129"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=5129"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}