US retailers rally after earnings

Broad US stock market is feeling pain today with major Wall Street indices dropping 0.5-1.0% at press time. Lack of an agreement on US debt ceiling continues to exert pressure on equities as time to reach a deal ahead of June 1, 2023 is running out. However, there is a group of US stocks that are rallying today - retailers. Abercrombie & Fitch (ANF.US), Urban Outfitters (URBN.US) and Kohl's (KSS.US) are rallying after posting upbeat results for February-April 2023 quarter.

Abercrombie & Fitch (ANF.US)

Abercrombie & Fitch (ANF.US) rallies over 25% today. Company reported much better than expected earnings for fiscal-Q1 2024 (February-April 2024). Company reported the highest fiscal-Q1 revenue in a decade with gross margin also rising significantly from a year ago quarter. Solid Q1 results encouraged management to boost forecasts for full fiscal year 2024. Analysts note that given Abercrombie's momentum in Q1, full-year forecasts look conservative.

Fiscal-Q1 2024 results

• Adjusted EPS: $0.39 vs $0.03 expected (-$0.27 in Q1 2023)

• Net sales: $836 million vs $814.4 million expected (+2.9% YoY)

• Gross margin: 61.0% vs 58.0% expected (55.3% in Q1 2023)

Fiscal-Q2 2024 forecast

• Net sales growth: +4-6% (exp. +2%)

• Operating margin: 2-3%

Fiscal-2024 annual forecast

• Net sales growth: +2-4%, up from previous forecast of +1-3%

• Operating margin: +5-6%, up from previous forecast of +4-5%

• CapEx: around $160 million (exp. $161.5 million)

Abercrombie & Fitch (ANF.US) jumped at the beginning of today's cash trading on Wall Street and extended those later on during the session. Stock is trading at the highest level since the beginning of March 2023. The nearest resistance zone to watch can be found in the $31.00 area. Source: xStation5

Urban Outfitters (URBN.US)

Urban Outfitters (URBN.US) gains over 20% and is making the biggest single-day jump since November 2020. Company reported better earnings, sales and margins. Analysts note a positive inflection in sales-to-inventory ratio. Better-than-expected results were driven by strong sales in Anthropologie and Free People brands, that helped offset weak showing of Urban Outfitters brand.

Fiscal-Q1 2024 results

• EPS: $0.56 vs $0.35 expected

• Net sales: $1.11 billion vs $1.09 billion expected

• Comparable retail segment sales: +5% vs +2.4% expected

• Gross margin: 33.3% vs 31.7% expected

• Inventory: $590.3 million vs $633.3 million expected

Urban Outfitters (URBN.US) launched today's trading with a big bullish price gap and broke above a recent $25.70-29.10 trading range as a result. However, the upward move stopped short of a textbook range of the upside breakout from the range ($32.70). Source: xStation5

Kohl's (KSS.US)

Kohl's (KSS.US) trades around 7% higher on the day. Stock launched today's trading with an around-15% bullish price gap but has erased big part of the move since. Kohl's reported an unexpected profit in fiscal-Q1 2023 and improvement in gross margin. However, net sales were mostly in-line with market expectations, and comparable sales even dropped more than expected. Company decided to maintain its previous forecast for full fiscal-2024.

Fiscal-Q1 2024 results

• EPS: $0.13 vs -$0.40 expected ($0.11 in Q1 2023)

• Net sales: $3.36 billion vs $3.34 billion expected (-3.3% YoY)

• Comparable sales: -4.3% vs -3.9% expected

• Gross margin: 39.0% vs 36.9% expected (38.3% in Q1 2023)

• Merchandise inventories: $3.53 billion vs $3.71 billion expected (-5.6% YoY)

Fiscal-2024 annual forecast

• Adjusted EPS: $2.10-2.70, unchanged from previous forecast (exp. $2.40)

• Net sales growth: -2% to -4%, unchanged from previous forecast

• Operating margin: 'about 4%', unchanged from previous forecast (exp. 3.9%)

Kohl's (KSS.US) also launched today's trading with a big bullish price gap but unlike Abercrombie or Urban Outfitters, it has already erased the majority of gains. Stock started to move lower after a failure to break above the 50-session moving average (green line). Source: xStation5