As clothing and electronics retailers prepare to release their reports this week, analysts are approaching the news with caution. Despite growth in holiday-season spending, Wall Street remains skeptical due to various factors such as fluctuations in mall traffic, warmer winter weather, a struggling younger consumer base, and difficulties in staying relevant in the fashion industry.
One of the retailers under scrutiny is Macy’s Inc. (M). The department store recently declined a takeover bid but expressed openness to opportunities that would benefit shareholders. Macy’s new CEO, Tony Spring, took over this month, and the company has announced plans to cut corporate staff and close some stores. Analysts have expressed caution regarding Macy’s performance, citing challenging mall traffic trends and work-in-progress assortment for private label brands.
Urban Outfitters Inc. (URBN) is also reporting this week. While the company experienced a boost in holiday-period sales, it was mainly driven by its Free People and Anthropologie stores, which cater to wealthier shoppers. The younger customers at its namesake brand have been struggling with higher prices and seem uninspired by the clothing assortment. Analysts remain cautious as Urban Outfitters aims to re-resonate with its customer base and return to top-line growth.
Another retailer to watch is TJX Companies (TJX), the parent company of T.J. Maxx and Marshalls. With elevated prices for basics, TJX stands to benefit from a trend of consumers migrating from department stores to off-price chains. However, analysts have noted a year-long run-up in TJX’s stock and suggest that stronger results from other store chains that don’t discount as much could lead investors to seek bigger gains elsewhere.
Best Buy Co. (BBY), an electronics retailer, will also release its report this week. Some analysts anticipate a rebound in demand for electronics as people replace old phones, laptops, and other devices. They predict that the industry will benefit from the natural upgrade and replacement cycles for technology purchased during the COVID-19 pandemic. However, lower prices for general merchandise, including clothing and electronics, have negatively affected retailers’ sales and profits.
In addition to the clothing and electronics retailers, other companies reporting this week include Vizio Holding Corp., AMC Entertainment Holdings, Domino’s Pizza Inc., Papa John’s International Inc., Dell Technologies Inc., Lowe’s Cos., and eBay Inc. The streaming giant, Paramount Global (PARA), will issue its results amid ongoing consolidation in the streaming industry and investor pressure for profit growth. Paramount is reportedly considering multiple merger and acquisition bids while also implementing cost-cutting measures.
The entertainment industry as a whole is experiencing challenges, with Warner Bros. Discovery Inc. reporting deeper-than-expected losses, particularly within its streaming business. Paramount Global’s results will be closely watched as the streaming industry adjusts its spending on programming, potentially influencing the types of shows and films that get made.
Cloud services companies Salesforce Inc., Snowflake Inc., Okta Inc., and Workday Inc. will also report their results this week. These reports will provide insights into employers’ tech budgets and the demand for artificial intelligence.
Overall, analysts remain cautious about the clothing and electronics retail sector despite the growth in holiday-season spending. Fluctuations in mall traffic, challenges in attracting younger consumers, and difficulties in staying relevant in fashion have raised concerns. However, there is optimism regarding a potential rebound in demand for electronics and the opportunities for off-price retailers. The industry as a whole is navigating the effects of lower prices for general merchandise and the ongoing consolidation in the streaming industry.
