Lululemon (LULU) getting bootstomped this morning after the company guided estimates lower for the fourth quarter. It’s hard to call the news a shock given the recent trends in the business except for the fact that it blamed the miss on traffic and sales in January. How one of the slowest months of the year could be so bad as to justify a warning less than two weeks into the new year is a mystery.
SodaStream (SODA) is also blowing up this morning after the company took down estimates for 2013. CEO Daniel Birnbaum called the holiday season “challenging” in the US and said the quarter was disappointing. Expenses were higher than expected and selling prices were lower, the kiss of death combination for super-discretionary products like yoga gear and at home carbonation kits.
Even good companies are getting hit. Bed, Bath and Beyond (BBBY) warned last week as did Target (TGT) and Family Dollar (FDO). Shares of JC Penney (JCP) also fell last week after the company said it was satisfied with holiday results but provided no further guidance.
Suffice it to say Wall Street is skeptical about retailers ability to hold margins in the face of heavy promotions during the holidays. Between chaotic promotional activity and credit card identification stealing there’s more reason than ever to do your shopping at home.
With the exception of Macys (M) the margin story has been bleak at best for the retailers giving us an early peak at fourth quarter results. Soft margins shouldn’t come as a huge shock to anyone who was out in the malls during the holiday season and saw some of the chaos markdown action but numbers so far have suggested the retailers may have gone even crazier than it seemed in a futile attempt to generate store traffic.
Retailers don’t start reporting until next month. From what we’ve heard so far it’s going to be hard to give the consumer discretionary sector the benefit of the doubt until the smoke clears on some of these warnings.