WASHINGTON – Investors are snatching up shares of retailers as a more complex picture of the U.S. consumer emerges, one in which some brands may emerge as winners this year.
Just one week ago it appeared that the sector might be in for a universally dismal holiday shopping season after gloomy earnings reports were issued by blue-ribbon retailers like Macy’s and Nordstrom. Both companies cut their outlook for the year and said markdowns were on the way to clear loads of excess inventory.
But there was a raft of stronger reports from retailers ranging from Abercrombie & Fitch to Foot Locker, and indexes that track retail shares have had a surge this week that has surpassed any in the past two years.
Abercrombie & Fitch soared more than 27 per cent in trading — its biggest one-day percentage gain in three years — after a shift in strategy helped double third-quarter profits. While other retailers who have slashed prices to lure customers through the door, Abercrombie & Fitch focused instead on reinvigorating its brand.
Ross Stores Inc. also reported better-than-expected results based on higher margins for its merchandise, sending shares up 8 per cent in trading.
Foot Locker also posted higher profit for the quarter, demonstrating continued demand for athletic footwear.
Even companies that reported disappointing earnings saw their shares buoyed as investors looked for deals.
Gap Inc. rose more than 6 per cent a day after the San Francisco retailer said sales fell 4 per cent in the third quarter.
Jefferies analyst Randan Konik said Gap “remains one of the steadiest, most consistent operators in our space,” despite “the perfect storm of headwinds the company has faced this year.”
Another retailer focused on youth fashion, Urban Outfitters Inc., also got a boost Friday, despite disappointing results earlier in the week. On Monday the clothing and accessories seller said quarterly sales at stores open at least a year — a key metric of a retailer’s health — rose just 1 per cent due to weaker customer traffic.
Citi analyst Paul Lejuez suggested investors are looking to scoop up companies at bargain prices after months of negative news for retailers. He said Philadelphia-based Urban Outfitters is “a name to own for bottom feeders.”
That company’s shares rose 73 cents, or 3.3 per cent, to $23.02 in afternoon trading Friday. Urban Outfitters’ stock is down 16 per cent for the year.