The first day of the month is often a positive one for the stock market, but September didn't bring any cheer to Wall Street. Ongoing concerns about the prospects for the global economy in light of tighter monetary policy worldwide are weighing on sentiment overall, and with no immediate relief in sight, the Nasdaq Composite (^IXIC 0.10%) saw outsize declines compared to the broader market. Shortly after the market opened, the Nasdaq was down nearly 1%, bringing its year-to-date losses to back above the 25% mark.
Investors have gotten used to tech stocks being the culprit when it comes to Nasdaq underperformance. There were a fair share of companies in the technology space that saw their stock prices fall on Thursday, but the damage wasn't limited to that sector. Indeed, a couple of high-profile losses among Nasdaq retail stocks showed that worries about the consumer economy could be even more important to the overall market. Below, you'll see why losses for Duluth Holdings (DLTH -1.38%) and Lands' End (LE -4.59%) were noteworthy as September began.
Duluth sees demand slow
Shares of Duluth Holdings were down more than 9% in the opening minutes of Thursday's regular trading session. That actually seemed like good news in the context of premarket trades that had seen the share price off as much as 20% from where it finished Wednesday.
Duluth's financial results for the quarter ending July 31 reflected the pressure on the retail industry broadly. Net sales of $141.5 million were down more than 5% from year-ago levels, with in-store revenue falling more than 6%. Gross margin fell more than a percentage point year over year, with a one-time inventory write-down stemming from damaged shipments accounting for most of the decline. Net income plunged by more than 70% to $2.4 million, working on to $0.07 per share.
The commentary that Duluth CEO Sam Sato gave was telling. Sato pointed to macroeconomic uncertainty and high inflation that had a negative impact on the amount of discretionary income consumers could spend. With no immediate end in sight, Duluth adjusted its guidance for the remainder of the 2022 fiscal year. Revenue is likely to come in between $680 million and $705 million for the year, with earnings between $0.61 and $0.71 per share.
Duluth has tried to consolidate its various sub-brands under the Duluth Trading umbrella, and investors had hoped that an emphasis on outdoor activities would pay off as pent-up demand for travel got people outside again. However, Duluth hasn't been immune to inflationary pressures, and that could continue to weigh not just on its results but on those of many peers in the industry.
Lands' End takes a hit
Lands' End suffered even bigger stock losses, with the share price falling 16% in early trading. Fiscal second-quarter results for the period ending July 29 didn't give investors the boost they had hoped to get.
Revenue at Lands' End was down nearly 9% for the quarter to $351 million. Big drops of 23.9% in international e-commerce sales and 14.4% in U.S. e-commerce revenue reflected supply chain issues that delayed the shipment of key inventory. The overall numbers would have been even worse had it not been for the partnership between Lands' End and Kohl's (KSS -2.01%), as third-party revenue, coming largely from the Kohl's online marketplace, jumped nearly 43% year over year.
Lands' End saw the same pressure on margins that many other retailers have reported. Gross margin fell more than five percentage points to 41%, and that contributed to a net loss of $0.07 per share that reversed a larger profit in the year-ago quarter.
Coming into 2022, many saw Lands' End as having an edge over competitors in fighting industry challenges. However, the stock has fallen sharply so far this year, and it'll take considerable improvement in the vital holiday shopping season to restore investor confidence in the company.