Gap, Abercrombie results to show if mall shoppers are splurging
By Savyata Mishra and Juveria Tabassum
May 28 (Reuters) - Results from U.S. mall-based apparel chainsthis week will give a clearer picture of whether Americans are splurging on clothes and accessories heading into summer following mixed results from big retailers Walmart and Target.
Abercrombie ANF.N and American Eagle AEO.N are set to see revenue rise for at least their fifth straight quarter, while Gap GPS.N is expected to post a marginal growth in comparable sales after five quarters of declines, betting on in-season merchandise to drive demand at full price.
"We are seeing green shoots in traditional apparel driven by fashion newness, like wide-leg bottoms. While category growth remains tepid, we are seeing a wider gap between share gainers and losers," said Mari Shor, a senior equity analyst at Columbia Threadneedle Investments.
While a focus on fresh styles is expected to pull customers to these brands this summer, cleaner inventories have also helped companies offer fewer goods at discounts, boosting margins.
The expectation of strong demand for apparel companies comes as shoppers hesitate to splurge on big-ticket discretionary items like electronics and home furnishing.
Earlier in the month, Walmart reported a blowout quarter and raised its annual forecast on the back of demand for groceries as well as non-essential goods.
Walmart leads the total apparel retail market in the U.S. in terms of market share, according to data from research firm GlobalData, followed closely by Target.
Off-price retailers including TJX Cos TJX.N and Ross Stores ROST.O, which also delivered strong quarterly results, together hold 5% share of the U.S. apparel retail market. Gap's Old Navy brand held 1.3%.
Walmart's CEO John Furner said on a post-earnings call that apparel and online fashion categories stood out in the quarter.
Meanwhile, Target gave a dismal quarterly performance with only apparel being one of the few bright spots for the company.
"This gives us some optimism that we could see a better balance of spending between discretionary and frequency categories in the years ahead," Target CEO Brian Cornell said on an earnings call last week.
U.S. data also pointed to Americans feeling better about stretching their budgets as a strong labor market helps them navigate sticky inflation, propping up retail sales over the last few months.
"Consumers have become a lot more picky about what they buy and so are shopping around more, which is leading to a patchwork of winners and losers," said Neil Saunders, managing director of research firm GlobalData.
Abercrombie, whose shares have risen nearly 70% this year, is set to report first-quarter results on Wednesday before the market opens and American Eagle after the market closes. Gap is set to post its quarterly results on Thursday.
Walmart Leads Total U.S. Apparel Market https://reut.rs/4522FPG
Walmart Leads Total U.S. Apparel Market https://reut.rs/3KkHIpS
Reporting by Savyata Mishra and Juveria Tabassum in Bengaluru; Writing by Aishwarya Venugopal; Editing by Anil D'Silva
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