Stock markets moved higher in early trading on Friday, with investors continuing to encounter volatility as they try to assess the likely path of monetary policy from the Federal Reserve. With so much uncertainty about whether interest rate increases will continue at their recent pace or begin to slow, it's hard for financial markets more broadly to find any clear direction.
Nowhere was that uncertainty more evident than in the performance of companies in the retail sector. A host of retailers announced their latest results, and even though many of them shared common themes, their stock-price movements following their reports varied considerably.
Finding gains
On one hand, several retailers posted sharp gains on Friday morning. Gap (GPS 0.99%) saw its stock jump 10%, as the apparel retailer's fiscal third-quarter results for the period ending Oct. 29 included a 2% rise in revenue on a 1% gain in comparable sales. Shareholders were particularly happy to see the company reverse a year-ago loss with earnings of $0.77 per share for the period. However, Gap did project that its fourth-quarter sales could be down by a mid-single-digit percentage compared to last year's holiday period. Moreover, it plans to take aggressive action to reduce inventory levels and clear out its pipelines to meet new demand trends.
Foot Locker (FL 3.13%) enjoyed even larger gains of 17%. Its third-quarter results for the period ending Oct. 29 included a small 0.7% decline in revenue from year-ago levels, but comparable-store sales inched higher by 0.8% year over year. Adjusted earnings of $1.27 per share were better than most investors had expected, and Foot Locker boosted its full-year earnings guidance to a new range of $4.42 to $4.50 per share, up from the previous projection of between $4.25 and $4.45 per share. Even so, though, foreign exchange pressure will still hit sales, with Foot Locker expecting 2022 revenue to finish down 4% to 5% from 2021 levels.
Lastly, Ross Stores (ROST -0.55%) got a nice boost, gaining 16% as its fiscal third-quarter results held up reasonably well. Sales inched lower by 0.2% to $4.57 billion for the period ending Oct. 29, leading to a steeper decline of about 8% in earnings to $1 per share. Even though the retailer noted higher markdowns and an unfavorable cost environment, Ross kept on buying back shares of stock during the period. Shareholders were also comfortable with calls for same-store sales in the holiday quarter to be flat to down 2%, with full-year earnings forecast in a range of $4.21 to $4.34 per share, down from $4.87 in fiscal 2021.
Some troubling trends
However, not all of the news was good. Williams-Sonoma's (WSM 1.67%) stock fell almost 10% as the home furnishings retailer's stronger growth fell short of expectations. Third-quarter revenue of $2.19 billion for the period ending Oct. 30 was up 7% year over year, with the company reporting comparable brand revenue growth of 8.1%. That added to massive gains over the past couple of years that have led to three-year comps rising almost 50%. Earnings of $3.72 per share were up 13% from year-ago levels. However, despite repeating its guidance for fiscal 2022 revenue growth rising mid- to high-single-digit percentages, Williams-Sonoma held off on giving guidance for fiscal 2023 and beyond until after the holidays.
On the luxury side, Farfetch (FTCH -8.42%) shares were down 6%. The fashion platform provider saw weakness from the closure of its Russian business and from ongoing pandemic-related lockdowns in China, with revenue rising just 1.9% year over year and gross merchandise value falling almost 5%. Losses narrowed to $0.14 per share on an adjusted basis, but Farfetch sees its digital platform gross merchandise value falling 5% to 7% for the full year compared to 2021.
On the whole, most retailers have positioned themselves as well as they can to deal with macroeconomic uncertainties and their potential impact on shoppers. They've also set a low bar for the holiday season, so if they fail even to hit those numbers, retail stocks could leave investors extremely disappointed heading into 2023.
