Retailers like Gap and Foot Locker had a strong week. That doesn’t spell a consumer comeback

Retail’s
biggest
winners
during

first-quarter
earnings
aren’t
thriving
because
consumers
are
suddenly
spending
more
on
discretionary
goods
—
it’s
because
they’re
executing
well
and
cash-strapped
shoppers
are
choosing
them
over
competitors. 

If
there’s
one
takeaway
from
results
posted
by
the
largest
U.S.
retailers
over
the
last
few
weeks,
it’s
that
shoppers
are
still
spending
—
but
being

far
more
selective
about
where.

Feeling
the
brunt
of
sticky
inflation,
high
interest
rates
and
an
economy
that

feels
tougher
than
it
may
actually
be,
consumers
are
prioritizing
purchases
that
have
the
right
combination
of
value,
convenience
and
fun.

Companies
like


Abercrombie
&
Fitch,


TJX
Companies
and


Gap

impressed
Wall
Street
with
their
results,
while
others
like


Kohl’s,


American
Eagle
and


Target

disappointed.

Take
Gap
and


Foot
Locker
—
two
unlikely
winners
that
posted
results
on
Thursday.
Both
retailers
are
in
the
midst
of
ambitious
turnaround
plans
and
are
performing
better
than
expected
because
of
new
strategies
they’ve
implemented. 

Gap

posted
positive
comparable
sales
for
all
four
of
its
brands
—
Athleta,
Old
Navy,
Banana
Republic
and
its
namesake
banner
—
for
the
first
time
in
“many
years,”
beating
Wall
Street’s
expectations
across
the
board,
the
company
said. 

For
years,
Gap
had
been
losing
market
share
to
buzzy
competitors.
But

under
new
CEO
Richard
Dickson,
the
marketing
guru
credited
with
reviving
the
Barbie
franchise,
the
apparel
chain
has
focused
on
financial
rigor,
brand
storytelling
and
product
development.
In
under
a
year,
Gap’s
sales
and
profits
have
meaningfully
improved,
and
its
brands
are
beginning
to
be
part
of
the
cultural
conversation
again.

A
few
weeks
ago,
actor
Anne
Hathaway
went
to
a
Bulgari
party
wearing
a
white
Gap
shirt
dress
that
had
been
designed
by
the
company’s
new
creative
director,
Zac
Posen.
Critically,
Gap
dropped
the
$158
dress
to
consumers,
and
it
sold
out
within
hours.
This
combination
of
marketing
and
exclusive
product
drops
is
what
Gap
had
long
been
lacking,
and
what
competitors
had
already
been
doing. 

Foot
Locker
had
declined
over
the
last
couple
of
years,
but
with
the
right
combination
of
new
strategies
and
a
little
bit
of
luck,
its
turnaround
is

showing
signs
of
life. 

Under
CEO
Mary
Dillon,
Foot
Locker
has

worked
to
change
its
stores,
where
it
does
more
than
80%
of
its
sales.
It
has
tried
to
create
not
only
a
better
shopping
experience
for
consumers
but
also
a
better
place
for
its
critical
brand
partners.

Instead
of
two
walls
of
shoes
with
competing
brands
mixed
together,
Foot
Locker
is
changing
its
fleet
so
the
brands
have
their
own
unique
displays.
Its
new
“store
of
the
future”
concept
at
a
New
Jersey
mall
that
brings
that
strategy
to
life
has
become
its
best
performing
store
in
North
America
in
just
a
few
weeks,
Dillon
told
CNBC,
adding
that
brands
are
thrilled
with
the
new
design. 

The
shift
couldn’t
have
come
at
a
better
time.
Years
into
Nike’s
strategy
to
cut
out
wholesalers
and
sell
directly
to
consumers,
the
retailer
is
realizing
it
went
too
far
and
is

now
changing
course.

With
refreshed
stores
and
better
product
displays,
consumers
are
converting
more,
too,
and
paying
full
price
—
even
Foot
Locker’s
lower-income
shopper. 

“Our
consumer
…
this
is
a
category
that
is
very
important
to
them.
So
when
people
have
discretionary
income,
it
may
be
limited,
but
you’re
gonna
prioritize
where
you
spend
it,
right?”
said
Dillon.
“We’re
proving
that
people
are
willing
to
spend
full
price,
but
you
have
to
have
the
right
products
and
serve
it
up
in
a
way
that
makes
it
enticing,
right?
So
that’s
where
the
whole
customer
experience
really
matters.” 

Elsewhere,


Dick’s
Sporting
Goods

posted
a
solid
first-quarter
report
Wednesday,
as
executives
said
average
selling
prices
and
transactions
rose
and
that
they
saw
no
signs
of
consumers
trading
down
for
cheaper
options.
That
may
not
mean
shoppers
are
spending
more
broadly,
though:
Dick’s
has
long
been
considered
a
best-in-class
operator
that
offers
a
solid
shopping
experience,
meaning
it
can
win
even
when
consumers
are
picky
with
their
spending.

Two
retailers
that
didn’t
have
great
quarters
—


American
Eagle
and


Kohl’s
—
tell
a
story
of
executing
poorly
or
missing
out
on
trends. 

American
Eagle
handily
beat
earnings
estimates
thanks
to
a
new
strategy

designed
to
boost
profitable
growth,
but
it
fell
short
on
revenue
and

issued
cautious
guidance
that
was
slightly
below
Wall
Street’s
expectations. 

American
Eagle
president
and
executive
creative
director
Jennifer
Foyle
told
CNBC
that
the
brand
is
working
to
cut
out
items
that
aren’t
landing
with
shoppers
and
dig
down
into
the
ones
that
are.
She
said
the
retailer
was
overly
focused
on
jeggings
in
the
past
but
now,
low-rise,
baggy
fits
are
in. 

During
a
store
visit
at
the
American
Dream
mall
in
New
Jersey
on
Thursday,
an
associate
told
CNBC
that
the
location
didn’t
have
the
low-rise,
baggy
fit
in-stores,
and
they
were
only
available
online.
Meanwhile,
there
was
a
wall
of
jeggings. Still,
denim
was
a
strong
performer
for
the
company
during
the
quarter,
and
it
had
a
variety
of
other
styles
that
resonated
with
customers
at
the
location,
the
company
said.

Denim
is
having
a
moment
with
shoppers.
Search
levels
for
denim
are
hitting
peaks
in
a
20-year
data
set,
particularly
for
categories
like
tops
and
dresses,
according
to
a
Morgan
Stanley
research
note. 

Kohl’s
is
missing
the
mark
in
a
far
more
meaningful
way.
The
retailer

posted
dismal
numbers
on
Thursday,
as
both
earnings
and
revenue
fell
well
short
of
expectations.
It
cut
its
full-year
forecast
and
its
shares
plunged
more
than
20%,
the
stock’s
biggest
single-day
percentage
decline
ever.

The
weak
results
illustrated
a
challenge
the
retailer
is
still
contending
with:
Keeping
up
with
trends
and
staying
relevant. 

CEO
Tom
Kingsbury
told
CNBC
he
expects
the
“head-to-toe”
denim
trend
to
play
a
role
in
the
back
half
of
the
year,
but
it
could
already
be
out
of
style
by
the
time
Kohl’s
gets
around
to
adding
the
clothing
items
to
its
shelves.

“Denim
is
OK
business
for
us.
I
mean
it’s
really
not
the
most
important
time
for
denim,”
said
Kingsbury.
“We’re
selling
shorts
and
tees.
And
more,
you
know,
warm
weather
product.” 

Gap,
one
of
the
longtime
denim
leaders,
didn’t
seem
to
be
concerned
about
denim
going
out
of
favor
because
the
weather
is
warmer.
CEO
Dickson
said
the
company
is
getting
ready
to
launch
its
“exclusive
lightweight
denim
fabric”
dubbed
“Ultra
Soft”
in
time
for
the
summer.

Failing
to
chase
trends
has
been
an
ongoing
issue
for
the
aging
department
store
Kohl’s.
Kingsbury
told
CNBC
in
March
that
Kohl’s
used
to
buy
product
for
the
juniors
department
catering
to
teen
girls
—
one
of
the
most
trend-driven
areas
of
its
stores
—
12
to
14
months
in
advance.
When
the
apparel
hit
the
sales
floor,
it
was
“dead
on
arrival.”

In
an
age
where
viral
TikTok
videos
dictate
the
life
and
death
of
trends,
it’s
more
important
than
ever
for
retailers
to
stay
on
top
of
what’s
working
with
customers
and
what
isn’t.
They’re
not
just
competing
with
legacy
players,
they’re
also
vying
for
customers
with
innovative
yet
controversial
upstarts
like
Chinese-linked
Shein,
which
can
go
from
an
idea
to
an
online
product
in
a
matter
of
weeks.

That’s
a
far
cry
from
the
lead
times
at


Under
Armour,
where
it
currently
takes
about
18
months
to
get
a
product
from
an
idea
to
a
showroom
floor.
During
an
earnings
call
with
analysts
on
May
16,
CEO
Kevin
Plank
called
the
system
“just
plain
uncompetitive
in
the
2024
landscape”
as
he
laid
out
a
plan
to

streamline
the
process. 

Meanwhile,
Abercrombie
&
Fitch
posted
another
stellar
set
of
results,
even
as
it
begins
to
lap
tougher
comparisons.
It
has
posted
torrid
growth
in
part
because
the
company
is
responsive
to
its
customers
and
a
has
nimble
supply
chain
that
has
allowed
it
to
chase
trends
quickly
and
efficiently. 

It
posted
its
strongest
first
quarter
in
history,
and
now
expects
sales
to
grow
10%
in
fiscal
2024,
up
from
previous
guidance
of
between
4%
and
6%. 

CEO
Fran
Horowitz
told
CNBC
that
low-rise,
baggy
jeans
are
also
uber-popular
with
its
customers.
During
a
recent
visit
by
CNBC
to
its
Hollister
store
just
a
short
walk
from
American
Eagle’s
outpost,
plenty
of
those
style
of
jeans
were
on
display
for
shoppers
as
soon
as
they
walked
into
the
store.