The trend: Many prominent retailers have raised their Q4 outlooks in the latest sign that the 2024 holiday season exceeded expectations.

Zooming in:

• Abercrombie & Fitch nudged its net sales growth outlook up to a range of 7%-8%, from its previous guidance of 5%-7%. It also increased its full-year net sales growth outlook to around 15%.
• Amer Sports, parent of Arc’teryx and Salomon footwear, expects full-year 2024 revenue growth at the high end of its previous guidance of 16% to 17%, despite foreign exchange headwinds in Q4. The company also expects its full-year adjusted operating margin to be at the high end of 10.5% to 11.0%.
• American Eagle Outfitters said its quarter-to-date comparable sales through January 4 were up in the “low single digits,” outpacing its recent guidance of 1% growth.
• Lululemon athletica boosted its Q4 revenues forecast range to $3.56 billion-$3.58 billion, representing 11%-12% YoY growth—surpassing analysts’ $3.47 billion estimate. Excluding the 53rd week of FY2024, this equates to 7% YoY growth. The company also raised its diluted EPS forecast to $5.81-$5.85, again outdoing analysts’ $5.66 estimate.
• Nordstrom’s net sales rose 4.9% YoY in the nine-week holiday period ended January 4. It now expects full-year revenue growth of 1.5%-2.5%, up from 0%-1%. It also expects comparable sales growth of 2.5% to 3.5%.

Why it matters: The positive shifts suggest many retailers had a stronger-than-expected holiday season.

• US ecommerce sales rose 8.7% YoY to a record $241.1 billion, per Adobe—not far off our projection of 9.0% ecommerce growth.
• Total holiday retail sales between November 1 and December 24 increased 3.8% YoY, per Mastercard SpendingPulse data. Excluding autos, in-store sales rose 2.9% YoY, compared with a more robust 6.7% jump in ecommerce sales. We expected holiday sales to grow 4.3% last year.

A growing divide: The rising tide didn’t lift all boats. Affluent consumers drove spending, leaving lower- and middle-income shoppers behind. Brands like lululemon and Arc’teryx that cater to higher-income consumers thrived, while those serving lower- and middle-income demographics struggled.

• After a disappointing holiday season, Kohl’s announced plans to close 27 underperforming stores across more than a dozen states to improve profitability.
• Meanwhile, Macy’s expects sales to be at or slightly below its previous guidance of $7.8 billion to $8.0 billion.

Our take: The retail industry’s growing divide between the haves and have-nots, evident throughout the holiday season, is likely to widen further this year. Adding to the challenges, retailers may also contend with the incoming administration’s tariff policies and broader economic agenda.

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