Shares of Macy’s, Dollar Tree and Dollar General surged on Thursday after the three retailers reported earnings that defied Wall Street expectations and reduced recent concerns about the health of U.S. consumers. The results lifted the stock market, putting it on track to post its first weekly gain after a streak of seven straight weekly losses, which pushed the S&P 500 index to the brink of a bear market.
Stocks rose broadly on Thursday, with the S&P 500 gaining 2%. The tech-heavy Nasdaq composite, which has been in a bear market for months, which is commonly defined as a 20% decline from a recent high, rose 2.9%.
Macy’s shares rose 18% in afternoon trading after the company said its latest quarter profit more than doubled from the same period a year earlier, which the company said company called it “solid”. Macy’s also raised its full-year profit forecast, saying shoppers had moved away from athletic and leisure wear amid the pandemic.
“We saw a noticeable return to second-hand clothing and in-store shopping, as well as continued strength in luxury goods sales,” Macy’s said in a statement.
Discount chains also beat analysts’ expectations, with Dollar Tree’s earnings soaring more than 40% in its latest quarter, while Dollar General fell 18%, which was below forecasts. Both companies raised their sales forecast for the year and Dollar Tree also raised its earnings growth forecast. Dollar Tree shares jumped 21% and Dollar General 14%.
An index that tracks the consumer discretionary industry, which includes retailers, gained more than 5%, making it the best performing sector of the day.
The better-than-expected results and outlook could help ease concerns about how supply chain issues and rising prices could affect consumer spending, which accounts for the bulk of economic activity in the US. United States. Those worries came to the fore last week after Target and Walmart reported disappointing results and said inflation had weighed on earnings.
Macy’s and dollar stores weren’t the only retailers to fare better than expected. On Wednesday, Nordstrom’s earnings and sales beat expectations, while Dick’s Sporting Goods said consumer spending remained strong. Shares of Nordstrom rose 5% and Dick’s Sporting Goods rose 8% on Thursday, adding to sharp jumps on Wednesday. Costco was to release earnings after the market close.
Retailers still err on the side of caution. “We are in the midst of a very difficult time for consumers, as many are living paycheck to paycheck,” Richard W. Dreiling, executive chairman of Dollar Tree, told analysts on a call. . “They are facing the highest inflation since the early 1980s, record gasoline prices, the effects of the pandemic, geopolitical uncertainty and much more.”
Low-income households “are squeezed much more dramatically by high fuel and food prices and have less for discretionary spending,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “If you have a customer base that leans towards higher-income households, this retailer may fare better than those tied to lower-income households.”
Some industry watchers have warned that earnings reports will likely continue to be mixed from period to period.
“Retail through Covid has gone up, down, sideways, depending on the products involved and the ability of retailers to pivot and serve customers,” said Mark A. Cohen, director of retail research at Columbia Business School. Overall, he said, conditions would remain unpredictable: “Keep your seatbelt fastened and your helmet on, and be prepared for a bumpy ride.”
Coral Murphy Marcos contributed report.