Rising retail expectations

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Macy’s (M) shares jumped nearly 20% after the retailer raised its full-year profit forecast, helped by strong demand for high-margin apparel from consumers returning to weddings and other social events, as even as inflation curbs the purchasing power of consumers. Macy’s said consumers were also returning to in-store shopping faster than expected and buying more expensive dresses and formal wear.

Major U.S. dollar store chains also raised their expectations for the year as bargain-seeking Americans increasingly shop at discounters, with inflation nearing a high of four decades. Shares of Dollar General (DG) closed up 15% and shares of Dollar Tree (DLTR) ended up over 21% yesterday.

Beauty products also met with great success. Shares of Ulta Beauty (ULTA) jumped nearly 7% after posting strong earnings and higher guidance. Management expects comparable store sales to increase by up to 8% from the previous forecast of 4%.

This all follows the debacles of Walmart and Target, after shares fell on disappointing earnings, hit by rising inflation costs and supply chain disruptions, as well as excess inventory.

“A few key retailers have been able to reverse the trend of stagnant revenues and squeezed profit margins, as consumers continue to defy expectations. The fact that PCE declined in April versus March is a good sign that consumers are weathering the inflationary storm,” said Caleb Silver, editor of Investopedia.

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