What to Watch From This Week’s Retail Earnings Grab Bag

In these uncertain times, you couldn’t ask for a better set of data points than the retail results coming this week. You have struggling legacy brands (Gap) and new ones on the rise (On). There are tech platforms coming off a major victory (Farfetch) and struggling to win back investors’ confidence (ThredUp). There’s also the two biggest American department stores (Kohl’s, Macy’s), big-box retailers (Target, Walmart) and off-price chains (TJX, Ross). Here’s what to expect:

How bad are the holidays going to be?

For weeks we’ve been getting warning signs of a slowdown in consumer spending heading into the all-important pre-Christmas shopping season. Last week, Capri, the owner of Michael Kors and Versace, was the latest to sound the alarm, trimming its sales outlook as chief executive John Idol warned of “an increasingly uncertain macroeconomic environment.” This week we’ll get the biggest retail indicators yet, including outlooks for Black Friday and beyond from seven of the 10 largest US apparel retailers (Walmart, T.J. Maxx, Macy’s, Kohl’s, Gap, Target and Ross, according to a 2021 Wells Fargo ranking). Independent forecasts have ranged from cautiously optimistic to grim.

The retail situation has if anything deteriorated since those reports came out, though last week’s lower-than-expected inflation report offered hope that the pain will be short-lived. Can any of the retailers reporting this week offer further glimmers of hope? One place to look is off price, where T.J. Maxx, Marshalls and Ross have their pick of excess inventory from well-known brands. The only question is whether their lower-income customers can afford to buy even heavily marked-down merchandise.

What will a post-deal Farfetch do next?

The big deal with Richemont is signed, and Farfetch will at some point assume control of its biggest rival, Net-a-Porter (pending international regulatory approval, a process Richemont said last week could take up to a year). Farfetch has scale and appealing new products now that Cartier, Van Cleef & Arpels and other Richemont brands will sell on the site. And yet the company’s share price is back to its pre-deal levels, down about 80 percent in the last year. To investors, in other words, Farfetch is just another e-commerce company struggling to recapture its pandemic-era glory days. Executing the complex YNAP deal, and proving it can drive growth without overspending on customer acquisition, are the key points the market will be looking for Farfetch to hit this week.

Can a resale platform survive on its own?

ThredUp, an online consignment platform, has seen its share price fall to 77 cents, with a market capitalization of just $77 million. (It was worth $1.3 billion after its IPO last year.) Rivals Poshmark, Depop and Tradesy have all been acquired by larger competitors, which can provide the resources, technology and customer bases that are clearly needed to succeed in secondhand. The RealReal, one of the last independents standing, last week said it was revamping its business model to accept fewer low-price items as it focuses on profitability. ThredUp can’t move upmarket to the same degree — it specialises in more affordable apparel and accessories. It will need to prove its infrastructure and expertise are enough. (In addition to sales on its own platform, ThredUp has built a business handling resale for retailers such as Target and Hot Topic.) If it can make the economics of resale work, it’s also one of the rare companies that could benefit from a recession, if consumers trade down from new to secondhand.

What’s Gap’s plan?

Gap Inc. found itself ahead of the curve when it cut ties with Ye in September, just before the rapper’s public implosion. The attention since then has been mostly on how Adidas will move past its Yeezy partnership, but it shouldn’t be forgotten that Gap had also, to an extent, pinned its future on the artist and his brand. Where Adidas is looking to continue selling Yeezys in all but name, Gap will need to make a clean break. Its earnings this week would be a good time to talk about a plan B (which may be more wholesale deals like the one it announced with Amazon last week).

Everything Else Going On This Week

Tuesday

Eurozone Q3 GDP

Walmart results

Wednesday

On, TJX results

UK October inflation

US October retail sales

Thursday

Swiss Watch Exports for October

Burberry, Farfetch, Kohl’s, Ross, Macy’s, Gap results

Eurozone October inflation

Friday

COP 27 ends

UK retail sales October

Foot Locker results

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