American retailers 'spoil' optimistic holiday shopping season performance, but Wall Street questions the sustainability of growth.

The latest preliminary sales performance statistics for the holiday shopping season released by American retailers are generally better than market expectations, but Wall Street investment giants are not buying into it. They do not believe that the growth trend of retailers during the holiday shopping season can continue in 2025, when inflation is reignited and interest rates remain high. As a result, they have been selling off retail stocks that had already experienced a wave of growth in 2024, realizing profits, leading to a drop in almost all retail stock prices. Lululemon (LULU.US) and American Eagle (AEO.US) both raised their sales performance expectations for the holiday shopping season, but their stock prices appeared weak; Abercrombie & Fitch (ANF.US) also raised their performance expectations, but by a small margin, which could have led to a slight increase in stock prices in previous years, but in 2025 it caused a sharp drop in their stock prices. On Monday, after a strong consumer response during the crucial holiday shopping season, Lululemon, Abercrombie & Fitch, and American Eagle all significantly raised their fourth quarter performance expectations, which include the holiday shopping season. Urban Outfitters (URBN.US), a chain store for urban lifestyle products, also saw strong growth in holiday sales, but negative news also exists in the retail industry, as one of the retail giants, Macy's, Inc. (M.US) reported that its key quarter's performance was even worse than market expectations. Retailers are releasing optimistic outlooks, but stock prices are not optimistic Nevertheless, on Monday, many companies' stock prices still saw significant declines. Among them, Abercrombie's stock price experienced the largest drop by the closing of the US stock trading session, falling by more than 15%, despite the company's slight upward adjustment of fourth-quarter sales guidance, Wall Street investment firms seem to doubt that its rapid growth phase is coming to an end. High-end athletic apparel retailer Lululemon currently expects sales to grow by 11% to 12%, reaching $3.56 billion to $3.58 billion, higher than the company's previous forecast of $3.48 billion to $3.51 billion. Excluding an additional fiscal period added by the company in the fourth quarter of 2024, Lululemon expects sales to grow by 6% to 7%. The company also raised its profit forecast. Lululemon's management currently expects fourth quarter earnings per share to be between $5.81 and $5.85, compared to earlier expectations of $5.56 to $5.64. The company expects gross margin to increase by 0.3 percentage points, compared to previous expectations of a decrease of 0.2 to 0.3 percentage points. "Our products were well received by customers during the holiday shopping season, which allowed us to raise our fourth quarter performance guidance," said Megan Frank, CFO of Lululemon, in a statement. On Monday, Lululemon's stock price unexpectedly fell during US trading hours, ultimately closing up nearly 1%, although the stock price boost effect often associated with positive performance guidance announcements from companies was not as significant in the short term. This also reflects Wall Street's expectation that Lululemon's strong growth momentum may be difficult to maintain, especially in the current environment of persistent inflation pressures and high interest rates leading to a sharp reduction in consumer spending by middle-income Americans, forcing them and low-income groups to focus their spending on essential goods rather than non-essential goods. Meanwhile, Abercrombie also expects its holiday shopping season sales performance to be slightly better than expected. The clothing retailer has raised its net sales growth outlook to between 7% and 8%, up from the previous range of 5% to 7%. Abercrombie now expects full-year sales to grow by 15%. Previously, the company expected sales during that period to grow by 14% to 15%. Despite the upward adjustment in performance guidance, investors find that this outlook is significantly different from Abercrombie's stunning performance growth reported the previous year, when holiday sales surged by 21% year-on-year. Investors who are bullish on Abercrombie may believe that as the company's business model gradually matures, achieving performance growth compared to the same period last year becomes more challenging, and a slowdown in growth is reasonable. However, after experiencing explosive stock price growth for about two years, some may turn completely bearish. Abercrombie's full-year sales forecast is similar to last year's, but its sales increased significantly by 16% last year. In an official press release, Abercrombie CEO Fran Horowitz stated that the company will focus more on increasing profits rather than just sales to "drive long-term shareholder value." Horowitz stated in the release, "After two years of double-digit growth in sales and profits as expected, and with the support of the outstanding capabilities we have built, I am as confident as ever in the strength of our brand and operating model. In 2025, we will continue to achieve sustained profit growth through executing our strategic plan to win and retain global customers. Our goal is to use our healthy profit margin structure and balance sheet to grow operating profits and earnings per share at a rate higher than sales." These retailers released their latest performance expectations ahead of the annual International Consumer Retailers Association (ICR) conference held in Orlando. Some of America's most well-known retailers have been releasing early holiday shopping season sales performance data in 2025 before ICR, meeting with investors and analysts to discuss their latest performance guidance. The conference brings together the largest business banks, law firms, private equity firms, and top investment institutions on Wall Street, often setting the tone for consumer trading decisions at the beginning of the year and overall retail performance. American retail giant Macy's, Inc. also announced a preliminary fourth-quarter performance that includes holiday shopping season performance, but unlike.Its competitors share good news like that. The department store currently expects sales to reach or slightly below the previously announced range of $7.8 billion to $8 billion. On Monday, its stock price fell over 8%.Urban Outfitters also released preliminary performance data covering the holiday shopping season, stating that net sales for the two months ending December 31 are expected to increase by 10% year-on-year. Strong online sales have driven a forecasted 6% increase in comparable retail sector sales. Comparable sales for the Urban brand unexpectedly decreased by 4%, with the performance of this chain brand still lagging behind Anthropologie and Free People, whose comparable sales increased by 10% and 9% respectively. At the same time, sales for Urban's rental service Nuuly surged by 55%, thanks to a significant increase of 53% in the average number of active users. However, Urban Outfitters' stock price fell by 2% at the end of trading on Monday. American Eagle also raised its fourth-quarter performance expectations, stating that it expects operating profit to be around $135 million, higher than the previous estimate of $125 million. The company reported that comparable sales for the quarter ending January 4 increased by low single digits, compared to the previous expectation of growth of less than 1%. However, the company stated that total sales are expected to decrease by approximately 5% due to American Eagle's fiscal calendar having one week less this fiscal year compared to the previous fiscal year. This timing shift is expected to impact sales by $85 million in the fourth quarter and $60 million for the full year. On Monday, the company's stock price fell by about 4%. Holiday season sales are likely stronger than expected, but the outlook for non-essential consumer spending is not optimistic. Overall, the holiday shopping season in the United States covering November to December 2024, including Thanksgiving, Black Friday, Christmas, and New Year's festivities, did not see a sales boom as commonly seen post the COVID-19 pandemic. The National Retail Federation estimates that sales for the latest holiday shopping season will increase by 2.5% to 3.5%. Taking into account inflation, actual growth is expected to be minimal. However, some preliminary statistics show that the overall performance of the US holiday shopping season, while not as robust as in recent years, is likely slightly stronger than market expectations. According to SpendingPulse data from MasterCard, retail sales (excluding automotive sales) for the US holiday shopping season between November 1 and December 24 grew by 3.8% year-on-year. This preliminary statistic measures sales from in-store and online payment types. Adobe's latest data shows that US e-commerce-based consumer spending unexpectedly grew by 9% during the 2024 holiday shopping season, reaching a record $241 billion. Adobe's data reveals that in the last two months of 2024, over half of online consumer spending in the US was on electronics, clothing, and home goods. In comparison, spending on groceries and cosmetics had the highest year-on-year growth rates. Adobe's analysis team stated, "The significant discounts during the 2024 holiday shopping season attracted consumers who are increasingly price-sensitive." The company added that the sales volume is directly proportional to the discount amount. Adobe stated that overall, the record-breaking holiday shopping season online sales total driven by increased demand, rather than price increases, is positive news for the US economy. Since 2024, the US inflation rate, while slowing down, has still been on an upward trend, and under the continued pressure of high interest rates since 2022, some low-income US consumers have significantly cut expenses and prioritized purchases of essential items such as food and drinking water. The years of accumulated price increases have also brought demand challenges to many US retailers, especially those focusing on non-essential consumer goods. The so-called "holiday shopping season" in Western countries refers to the last two months of the year, November and December, which include Thanksgiving, Black Friday, and Christmas. Therefore, this period covers several very important shopping holidays and large-scale promotional activities for the retail industry. It is the most critical sales period for US e-commerce giants and retail giants such as Walmart Inc. and Target Corporation, also driving the GDP growth rate in the US. In the US GDP calculation system, 70%-80% of detailed statistical items are closely related to consumer spending. Undoubtedly, during the prolonged period of maintaining high interest rates by the Federal Reserve, the increasingly strong consumer spending in the US is increasingly driven by the high-net-worth individuals who are enjoying the so-called wealth accumulation effect brought about by the significant rise in housing prices and the US stock market. However, at the same time, many low-income consumers are relying on credit cards and other loans to support their daily expenses, with some showing significant signs of financial pressures such as increased default rates and delinquencies.