American retailer earnings highlights
All numbers below are in U.S. dollars.
- Nordstrom (JWN/NYSE): Earnings per share were $0.33 (versus a predicted $0.22), and revenues were $3.46 billion (versus a predicted $3.35 billion).
- Urban Outfitters (URBN/NYSE): Earning per share at $1.10 (versus a predicted $0.85), and it posted revenues of $1.18 billion (versus an estimate of $1.16 billion).
- Abercrombie & Fitch (ANF/NYSE): Earning per share at $2.50 (versus a predicted $2.30), and it posted revenues of $1.21 billion (versus an estimate of $1.19 billion).
Another solid quarter for U.S. consumer spending on clothing was overshadowed by the fact Macy’s had to delay its earnings announcement due to uncovering a massive fraud issue. A single employee is reported to have stolen more than $130 million from the company over the last few years. For context, that amount is almost equivalent to the store’s total profit for the entire last quarter/
Macy’s is hoping the nostalgia of its Thanksgiving Day Parade quickly changes the channel from the embarrassing lack of managerial oversight, as well as the fact the stock took a 4% price hit on the news.
Earnings beats generated a muted reaction from the market for the other three clothing retailers. Much of the good news appears to be baked into prices in the form of high expectations. Abercrombie & Fitch continues to “rise from the dead” (in this case “the dead” is clothing brands from my teenage years) and is up more than 90% over the last twelve months.
All three companies commented on the strength of the U.S. consumer, and increased freight prices that resulted from the port strikes early in the financial quarter.
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What!? Me, worry?
Back in the bad ol’ days (not the good ol’ days) of June 2022, soon after I started doing this column, I wrote about how I was pretty bullish on the stock market’s direction. That was based on how over-the-top market commentators seemed to be. I tend to think, if everyone already thinks the sky is falling, then how much worse can it get?
The opposite appears to be true today. “It feels like the election was a spark that seems to have awoken the animal spirits,” Ben Carlson recently wrote. “There’s excitement in the air again for investors.” It certainly seems like many believe the sky will never fall again.
What are animal spirits?
Animal spirits is a term used by economist John Maynard Keynes to explain irrational behaviour by investors. Traditional economics views people as rational beings who act logically based on facts. In real life, however, investors often act on emotions, rumours or gut instinct. Keynes attributes this behaviour to people having “animal spirits.”
Read the full definition of animal spirits in the MoneySense Glossary of finance and investing terms.
Carlson should be an expert on this type of investor sentiment, since he has a 400-episode podcast actually called Animal Spirits. And as evidence to prove his point, Carlson cites the recent post-2008 record for amount of money flowing into the stock market:
Many of the world’s biggest investment banks weighed in. They’re predicting moderately positive returns next year (the S&P 500 is currently at about 6,000).
Prelim roundup of Wall Street’s S&P 500 2025 year-end targets:
6,000: Jefferies6,400: UBS
6,500: Morgan Stanley, Goldman Sachs
6,586: CFRA
6,600: RBC, Barclays
6,700: BMO
6,500-6,700: Wells Fargo Inv Institute
7,000: Yardeni, CapEcon, Deutsche Bank
— Sam Ro (@samro.bsky.social) November 25, 2024 at 12:05 PM
There’s no question the probable Republican changes—including tax cuts, promised regulatory changes, AI speculation and simple momentum-based investor psychology—have changed the “vibecession” into a vibe-rally or vibe-boom. (We’re still workshopping what to call it when sentiment of the economy rides over its data).
