Disappointing holiday sales and margin pressures. Not a good combination for any stock. And today shares of Macy’s (M), down 6.39% as of 2 p.m. New York time; Lululemon (LULU, down 9.01%, and Chico’s FAS (CHS) down 9.41% are paying the price for disappointing Wall Street.
Macy’s warned that it sees sales at the low end to mid-point of guidance for $8.16 billion to $8.40 billion. Analysts were modeling for $8.31 billion in sales. Earnings are expected to be within the guidance range of $1.47 to $1.67. Analysts were looking for $1.60 a share. Macy’s news is essentially issued a profit warning for the first half of 2023. And I expect Wall Street analysts to cut their earnings projections for the first two quarters of 2023 on fears that slower sales will lead to margin pressure.
At Lululemon Athletica, the news might have been even worse. Holiday season sales, the company said will be in the range of $2.66 billion to $2.70 billion. The company’s previous guidance range was $2.605 billion to $2.655 billion. Analyst estimates called for $2.67 billion in sales. Earnings for the fourth quarter are seen in the range of $4.22 to $4.27. That’s down from a range of $4.20 to $4.30. The numbers indicate that LuLulemon had to aggressively mark down products to generate even those sales. Analysts now see gross margins dropping 90 to 110 basis points.
Chico’s FAS (CHS) now expects total net sales for the fourth quarter to range from $505 million to $515 million and diluted earnings per share to range from ($0.02) to $0.00. Chico’s previously guided to fourth-quarter sales of $535 to $555 million and earnings of $0.07 to $0.10. Wall Street had projected $545 million in sales and earnings of $0.09
Now retailers aren’t banks (which begin to report at the end of this week) or technology companies (which start to report a week after banks), but the margin compression story from these retailers is a negative portent for earnings across the economy. Thanks to inflation, costs look to be rising faster than they can be passed along to cautious consumers.