ORLANDO, Fla. — Lululemon And Abercrombie & Fitch on Monday raised their fourth-quarter guidance after a strong response from shoppers during the all-important holiday season.
Lululemon's new outlook went down well with investors, sending its shares up about 3% in premarket trading. But Abercrombie shares fell about 8% as investors wonder whether the rapid growth is coming to an end.
Lululemon now expects revenue to grow between 11% and 12% to between $3.56 billion and $3.58 billion, up from a previous range of $3.48 billion to $3.51 billion.
Excluding an additional fiscal week the company will have in the fourth quarter of 2024, Lululemon expects revenue growth of between 6% and 7%.
The company also raised its profit forecasts. Lululemon now forecasts fourth-quarter earnings per share to be between $5.81 and $5.85, compared to previous expectations of between $5.56 and $5.64. It expects gross margins to grow by 0.3 percentage points, after previously predicting they would decline between 0.2 and 0.3 percentage points.
“During the holiday season, our guests responded well to our product offerings, allowing us to raise our expectations for the fourth quarter,” Chief Financial Officer Meghan Frank said in a statement.
Meanwhile, Abercrombie also expects the holiday quarter to be slightly better than expected. The apparel company raised its outlook for net sales growth to a range between 7% and 8%, compared to previous expectations of between 5% and 7%.
Abercrombie now expects full-year sales to grow 15%. The company previously expected revenue to rise between 14% and 15% for the period.
The outlook is a far cry from the blockbuster numbers Abercrombie posted last year, when holiday sales rose a whopping 21% compared to the same period a year ago.
Investors who are bullish on Abercrombie would say it makes sense to see the company's growth starting to slow as it matures and faces tougher comparisons to the prior year period, but after about two years of explosive stock growth, some shares might could become bearish.
Still, Abercrombie's full-year sales expectations are close to last year's, when sales grew 16%.
In a press release, Abercrombie CEO Fran Horowitz indicated that the company will focus more on growing profits than growing revenue going forward, as it looks to “drive long-term shareholder value.”
“After an expected two years of double-digit top and bottom line growth, I am more confident than ever in the strength of our brands and business model as we move forward, supported by the excellent capabilities we have built,” said Horowitz. . “In 2025, we will strive to continue sustainable, profitable growth by executing our playbooks to win and retain customers around the world. Our goal is to leverage our healthy margin structure and balance sheet to grow operating dollar revenues and earnings per share at rates faster than sales.”
The retailers released their guidance ahead of the annual ICR conference in Orlando, where some of the most prominent U.S. retailers are expected to announce early holiday results and meet with investors and analysts to discuss their performance. The conference brings together Wall Street's largest banks, law firms, private equity firms and investors and is known for setting the tone for consumer dealmaking and retailer performance at the start of the year.
Macy'swhich is expected to present at the conference also released early results, but didn't have any good news to share like some of its competitors. The department store now expects sales to be at or slightly lower than the previously issued range of between $7.8 billion and $8.0 billion. Shares fell more than 3% in premarket trading.
Urban Outfitters also announced early holiday results, saying net sales for the two months ended December 31 grew 10% compared to the same period a year ago. Comparable sales in the retail segment increased by 6%, driven by strong online sales.
Urban's namesake banner saw comparable sales decline 4% as the chain continued to underperform against Anthropologie and Free People, where comparable sales grew 10% and 9%, respectively.
Meanwhile, revenue at Urban's rental service Nuuly rose 55%, driven by a 53% increase in average active subscribers.
Shares rose slightly higher in premarket trading.
Overall, the holiday shopping season was not expected to produce the blowout numbers that became common in the wake of the Covid-19 pandemic. The National Retail Federation expects sales to grow between 2.5% and 3.5%. When inflation is taken into account, real growth was expected to be minimal.
Still, some early readings have suggested that the holidays may be a little better than expected.
U.S. holiday retail sales, excluding auto sales, rose 3.8% year over year from Nov. 1 to Dec. 24, according to Mastercard SpendingPulse, which measures in-store and online sales across payment methods.