Earnings season is ending on a strong note thanks to retailers.
Macy’s (M) has led the charge with a 17 percent gain in the last week after crushing estimates. Others like Lululemon Atheletica (LULU), American Eagle Outfitters (AEO), Michael Kors (KORS) and Express (EXPR) are running as investors await their results next week.
On one hand, it’s not a surprise the group is doing well because it’s economically sensitive. And, the economy is doing great by most measures: Consumer sentiment is near its best levels this century and employment’s doing even better. President Trump’s tax cuts are also kicking in.
But it goes beyond that because retailers have spent the last couple of years trying to survive in a world dominated by Amazon.com (AMZN). Stores have been shut, merchandise reworked, inventories cut and business models reinvented for mobile and digital sales. Those efforts are really starting to pay off in 2018.
LULU, for example, added colors and fabrics to its yogawear. That’s helped win back customers to new products, with stronger pricing and margins. AEO has shaken off worries about older inventories as investors position for a strong spring shopping season. At KORS, the strategy is command higher prices by shrinking its footprint. Target (TGT), which reports tomorrow morning, has been launching new brands and streamlining its online-sales model.
Nike’s (NKE) also quietly snuck to new highs despite worries about increased competition. Still, the sneaker giant’s last set of numbers in March showed success migrating its business to the Internet and now the stock seems to be breaking out of a bullish triangle with earnings due in late June.
Despite success at some merchants, others continue to struggle. Just today, for instance, debt-laden J.C. Penney (JCP) crumbled to a new 52-week low after losing its CEO. Nordstrom (JWN) is also trying to hold a support line around $45 after same-store sales missed estimates last week.
In conclusion, retail has gotten slammed by digital competitors and new shopping habits. But some survivors may be rising from the ashes.