Resilient, optimistic consumers are opening their wallets again, leading retailers to boost their forecasts.
Crocs (CROX), Lululemon (LULU), American Eagle (AEO), and Abercrombie & Fitch (ANF) all updated their sales outlook this week as consumers showed their willingness to spend this past quarter, amid increasingly positive economic trends.
"The holiday season seems like it came in pretty solid for a lot of retailers," Joe Feldman of Telsey Advisory Group told Yahoo Finance at the ICR conference. While consumers are still selective about their purchases, the higher spending was in line with expectations that people would "shift their spend from a Taylor Swift [experience] to buying stuff," per Feldman.
As food inflation decelerates — up just 1.7% last month — Feldman said the extra funds are shifting towards discretionary spending. Gas prices staying relatively flat also "helps a lot." As of Tuesday, the national average was $3.08, compared to $3.28 a year ago.
For 2023, Crocs now expects to bring in a total revenue of $3.95 billion, up 11% from the year before. That's above its previous guidance of a 10% to 11% increase. Sales of the Crocs brand are expected to jump 13%, exceeding the $3 billion mark, while its HEYDUDE brand is expected to bring in roughly $949 million.
"In summary we felt like we had a really strong holiday season, played out how we thought it would," Crocs CEO Andrew Rees said at the ICR conference. "We thought it would be a big promotional and difficult environment ... we're very pleased with the plans in place that work extraordinarily well."
The trend towards casualization, comfort-led functionality, and personalization have kept customers hooked on Crocs. Its approachable price point is also "extremely important" in this environment, said Rees. Crocs' share price popped 20% on Monday following the announcement, though it has since pared back some of the gains.
Another beneficiary of casualization, Lululemon, now expects 2023 Q4 revenue to be in the range of $3.17 billion to $3.19 billion, up 14% to 15% year over year.
William Blair analyst Sharon Zackfia said the athleisure wear brand, which recently joined the S&P 500, is seeing both category growth and global growth.
The US consumer "wants to trade up ... wants to be aspirational," Zackfia told Yahoo Finance. "It's this kind of affordable luxury almost in the way ... 20 years ago, people would have said, Starbucks is an affordable luxury."
It could be just the start of another boom cycle for the company, as "they're still pretty early in their brand awareness cycle," Zackfia added.
Specialty retailers Abercrombie & Fitch and American Eagle also had a jolly holiday.
Abercrombie is expecting its Q4 net sales to increase in the high teens, compared to the previous guidance of a low double-digit jump. Its operating margin for the quarter is projected to be 15%, up from its expectations of 12% to 14%.
In a release, CEO Fran Horowitz said customers responded to the company's "compelling product assortments and engaging marketing."
Similarly at American Eagle, its fourth quarter-to-date revenue, through Dec. 30, is up 8% year over year. The company raised its expected operating profit for Q4 to $130 million, from a previous guidance of $105 to $115 million.
CEO Jay Schottenstein said the team is confident in its ability to "deliver healthy earnings growth and operating rate improvement," while maintaining "inventory and promotional discipline" and prioritizing cost control.
Watch out for the impact of holiday promotions in the next quarterly results though, as discounts could have pinched profitability, Adam Davis, managing director at Wells Fargo Capital Finance, told Yahoo Finance at the conference.
"[The holiday] was extremely promotional ... you had sales in late September, October, November. It was like Black Friday the whole month ... it never went away," he noted.
Feldman isn't too worried since he said promotions weren't as "deep" as last year.
"Things were 30% off [this holiday], they weren't 40-50% off," he explained, pointing out that the "glut of inventory" in 2023 drove steeper discounts.
"All the retailers have said they've had more full-price selling this season than last," added Feldman.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
