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The holiday fallout among retailers continued on Monday, as more brands updated their outlooks for Q4 based on the holiday results. While last brought a parade of layoff announcements and even a bankruptcy warning, there was a more mixed result in the early updates this week, and even a bright spot.
Let’s take a look:
Abercrombie: Women’s apparel lifts sales
Abercrombie & Fitch is now forecasting a better-than-expected fourth quarter based on holiday sales. The retailer lifted its Q4 outlook to project sales increasing 1-2%, compared with a prior forecast of a 2-4% decline in sales. Operating margin is set to be a higher 6-8%, up from 5-7% in the initial outlook.
CEO Fran Horowitz said the Abercrombie and Hollister owner’s “brands performed well during the peak holiday selling period.” Women’s sales are on track to deliver a record, while men’s sales saw an “acceleration” from the third quarter. Hollister is expected to finish the fourth quarter below 2021, but saw an increase from the third quarter as a result of “assortment adjustments and personnel changes.”
“Moving into 2023, we continue to balance playing both offense and defense in this evolving macroeconomic environment,” Horowitz said. “We are managing operating expenses tightly, and we continue to target an inventory level consistent with 2021 by year end, positioning our brands to chase receipts in the spring season. At the same time, we are leveraging the company's strong financial position to drive key, long-term investments in our operations, specifically in technology, stores and supply chain.”
American Eagle: 2nd best holiday season ever
American Eagle Outfitters (AEO) said its sales and profit for the holiday quarter are tracking at the high end of its forecast.
“Following record performance last year, we achieved our second highest holiday sales period in company history. I am pleased to see profit margins tracking at the high end of our expectations, powered by excellent inventory management and promotional discipline,” said CEO Jay Schottenstein, in a statement.
As of Jan. 7, revenue to date would be down 3% from the same quarter of 2022. Gross margins are expected to be 32-33%. While some of the earnings reporting is a matter of expectations, there is the context to consider. When comparing this year's sales with a record-breaking 2021 in a tougher consumer environment, most retailers would likely be pleased with those results.
AEO said that American Eagle is tracking slightly ahead of Aerie, while its Quiet Logistics service is expected to contribute 2 percentage points to fourth quarter brand revenue.
Lululemon: Profit warning
Apparel maker Luluemon Athletica's update for the fourth quarter on Monday spotlighted another concern among retailers: Profit pressure.
The company now expects gross margin for the fourth quarter to fall 90-110 basis points. Previously, it had forecast an increase of 10-20 basis points. It also expects SG&A expenses to contribute 100-120 basis points, compared to a previous expectation of 30-50 basis points of leverage.
There is still sales growth to be had. It now expects revenue to come in at $2.67 billion to $2.7 billion, compared with a prior forecast of 2.605 billion to $2.655 billion. The new forecast would represent growth of 25-27% over the fourth quarter of 2021. Earnings are now expected in the range of $4.22 to $4.27, compared with a previous forecast of $4.20-$4.30.
“We are pleased with our continued revenue growth and momentum in the business, as our teams navigate a dynamic macro-backdrop," said Lululemon CEO Calvin McDonald, in a statement. "In Q4, traffic remains strong across both physical and digital channels, and we anticipate delivering another quarter of solid earnings growth consistent with our updated EPS forecast."
In the third quarter, Luluemon said a record Black Friday helped to propel 28% year-over-year sales growth. Following Macy's description of lulls in the holiday shopping season, Lululemon's update echoes a point we heard from GlobalData Managing Director Neil Saunders in a review of overall holiday sales results: Retailers are holding strong on the top line, but the underlying numbers are proving to be more "problematic."
“The combination of more muted volume demand, lower margins, and higher costs of fulfillment point to an environment where bottom lines have come under increasing pressure,” Saunders said.
A takeaway for 2023
Coming off a week that saw layoffs and bankruptcy warnings, these updates present a key point as 2023 gets underway in retail: It won't be all good or all bad. While the difficult consumer environment is the same for everyone, the results are likely to be different for each business. It's true that some may not survive, while some may hit upon new approaches to thrive. Some had issues years ago that are magnified, while others are being hit by new problems now.
When seeking to make change, look for nuance and what's under your control. That's where the solution lies.
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On the Move has hiring news from Walmart US, Etsy, commercetools and more.
This week, retailers are bringing on C-level talent in areas such as people, operations and transformation. Plus, Kohl’s appoints an activist investor’s choice for CEO, Fanatics taps a former Snap executive for livestream shopping and Etsy brings aboard Facebook’s former general counsel.
Tom Kingsbury was appointed CEO of Kohl’s. Kingsbury was named interim CEO in December upon the resignation of now-Levi’s President Michelle Gass. Now, Kingsbury will have the job on a permanent basis. Kingsbury served as CEO of Burlington Stores from 2008-2019. Kingsbury was nominated by activist investor Macellum Advisors, which was pushing for change at Kohl’s. With Kingsbury’s appointment as CEO, Macellum has agreed to a “multi-year standstill.”
Judy Werthauser was appointed chief people officer at Walmart U.S. Werthauser comes to the teen-focused retailer from Five Below, where she served as EVP and chief experience officer. Over her four-year tenure, the chain grew from about 750 stores to more than 1,300 locations. Werthauser also served on the board of BJ's Wholesale Club, and is now resigning from that position. “I am excited to work alongside the world-class Walmart U.S. team as they bring the purpose of building a better world – helping people live better and renewing the planet while building thriving, resilient communities – to life,” Werthauser wrote in a LinkedIn post.
Mike Brewer was named chief operating officer at Crate & Barrel Holdings, overseeing operations at Crate & Barrel, CB2, Crate & Kids and Hudson Grace. Brewer brings 20 years of experience from Nike, where he served in roles including sourcing, manufacturing and supply chain. Crate & Barrel said Brewer’s appointment was part of the home retailer’s “ongoing efforts to evaluate and alter its structure in ways that help support overall growth.”
Keith Melker. (Courtesy photo)
Keith Melker was appointed chief strategy and transformation officer at JCPenney. Melker comes to the department store retailer from Wehner Multifamily, where he served as CEO. He was also a previous chief strategy officer at the Kimberly-Clark Corporation. Melker will oversee the transformation office, which includes ownership of metrics such as profitable traffic, inventory management, digital growth and strategic partnerships. With this move, Katie Mullen will remain chief strategy officer.
Blaine Trainor is joining ecommerce software provider commercetools as VP of global partnerships and alliances. In the role, Trainor will lead the headless commerce company’s partnerships ecosystem, working with companies including Deloitte, CapGemini, AWS and Google Cloud. Trainor previously served in senior leadership roles at SAP over a 12-year tenure, and also held sales roles at hybris software and Sterling Commerce.
Nick Bell, a former Google and Snap executive, will lead a new livestream shopping division of Fanatics, Footwear News reported. Bell previously led the teams behind Google Search Experience, and served as VP and global head of content and partnerships at Snap Inc. Bell will lead the Fanatics Live division, which will launch a standalone app that is geared toward collectibles.
NIck Bell. (Photo via LinkedIn)
Colin Stretch was appointed chief legal officer at corporate secretary at Etsy, effective Feb. 14. Stretch previously served as general counsel at Facebook from 2013-2019. He then spent two years as leader in residence at Columbia University Law School's Reuben Mark Initiative for Organizational Character & Leadership, and went on to the law firm Latham & Watkins.
"Colin's extensive experience will be critical to Etsy's efforts to ensure we remain a safe and trusted marketplace, broaden our reach across all our brands, and advocate for microbusinesses around the world,” said CEO Josh Silvermann, in a statement.