Lululemon Athletica and Abercrombie & Fitch raised their current-quarter sales targets on Monday, helped by demand for heavily discounted apparel during the holiday season, even as steep promotions took a bite out of some retailers’ margins.
People have also shopped more on their mobile phones, comparing prices, as well as evaluating shipping times and return policies with the help of artificial intelligence-enabled chatbots as they waded through a highly promotional holiday retail environment.
The apparel category had the highest discount rates in the U.S. at about 33% this holiday season, according to data from Salesforce, as apparel makers compete with newer brands and online wares.
This took a toll on margins, with Abercrombie keeping its fourth-quarter margin forecast intact, sending its shares down nearly 6% in premarket trading.
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Lululemon, which has focused on introducing new colors and styles to its portfolio to allow for more full-price selling, bumped up its margin and profit forecast and saw its shares rise about 4%.
Department store operator Nordstrom raised its annual forecast last week on the back of robust sales during the holidays as deep discounts on apparel and home decor items helped attract deal-hunting customers to its outlets.
On the other hand, Macy’s struggled to drum up demand at its namesake stores highlighting the continued woes of the department store operator.
Macy’s expects fourth-quarter net sales to be at or to be slightly below the low-end of its previously issued range of $7.8 billion to $8.0 billion. Its shares were down about 2% before the bell.
Lululemon now expects quarterly net revenue in the range of $3.560 billion to $3.580 billion, and profit per share between $5.81 to $5.85.
This compared with its prior targets of net revenue in the range of $3.475 billion to $3.510 billion, and profit per share between $5.56 to $5.64.
Abercrombie said it expects fourth-quarter net sales to grow between 7% and 8%, compared with its prior target of 5% to 7%.
Why Lululemon is signalling it’s having a healthy holiday sales quarter
