Wall Street has enjoyed a considerable bounce this week, and Friday, it appeared that investors were ready to take a break and assess the broader situation. With the World Economic Forum in Switzerland focusing a lot of attention on macroeconomic and geopolitical factors, market participants have a lot of things on their minds, but they feel more comfortable with the inherent uncertainty about the future. As of 8:15 a.m. ET, futures on the Dow Jones Industrial Average (^DJI 0.67%) were up 19 points to 32,619. S&P 500 (^GSPC 0.87%) futures had risen 11 points to 4,067, while Nasdaq Composite (^IXIC 1.11%) futures were higher by 65 points to 12,344.
Over the past couple of weeks, retail stocks and their latest earnings have been dominating financial headlines. Gap (GPS -0.05%) and American Eagle Outfitters (AEO 0.63%) added their names overnight to the list of companies disappointing their shareholders with their recent results, as their stocks fell sharply in premarket trading. However, there was one company that managed to move higher following its financial report. Read on for the details.
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Gap, American Eagle sink
Shares of Gap were down 18% in premarket trading, while American Eagle's stock fell 13%. Both companies failed to satisfy their shareholders with their recent business performance.
Gap's first-quarter result was somewhat of a mess. Revenue fell 13% on a 14% drop in comparable sales. Both in-store and online sales fell double-digit percentages, and margins took huge hits due to freight costs and higher discounting. Moreover, Gap cut its full-year forecasts, expecting revenue to fall in the low- to mid-single-digit percentages and adjusted earnings to be just $0.30 to $0.60 per share.
American Eagle's numbers weren't quite as poor, but they still showed the pressures on the industry. Revenue was up 2% overall, with an 8% rise at Aerie offsetting 6% lower sales at the namesake American Eagle stores. The retailer ended the quarter with a glut of inventory, and weak margins sent earnings down to $0.16 per share, about two-thirds lower than the corresponding figure from the same period a year ago. American Eagle also cut its full-year outlook, looking to achieve low single-digit sales growth compared to 2021.
Both companies hope they can reset their operational models in order to get into better positions by the second half of the year, when critical back-to-school and holiday shopping seasons will play a key role in their overall performance for the year. Based on their share prices, though, investors aren't optimistic about the chances of success.
An ultra-strong quarter at Ulta
On the plus side, though, Ulta Beauty (ULTA 1.08%) posted solid gains. Its stock rose nearly 8% in premarket trading Friday.
Ulta's financial results soared in the first quarter of 2022, reflecting people returning to work and going out to entertainment venues again. Net sales were up 21% on an 18% rise in comparable sales. Gross margin rose more than a percentage point to 40.1%, and earnings of $6.30 per share were up well over 50% year over year.
Ulta also expects ongoing momentum for the rest of the year. It boosted its fiscal 2022 sales forecast by $300 million to $400 million to a new range of $9.35 billion to $9.55 billion. Ulta also added $1 to $1.40 per share to its earnings forecast, which now calls for $19.20 to $20.10 per share on the bottom line.
Ulta still expects to open 50 new stores this year and plans to remodel or relocate 35 more. With ongoing stock buybacks as well, Ulta is benefiting from renewed activity among consumers, and investors are excited about the salon retailer's future prospects.
