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Retailers see staffing challenges as omicron rages, gross sales taking successful

A “now hiring” signal is posted on an City Outfitters retailer in San Francisco.

David Paul Morris | Bloomberg | Getty Photographs

Retail executives presenting on the digital ICR Convention this week paint an image of how the Covid omicron variant is denting gross sales and leaving shops and distribution facilities understaffed.

However thus far traders appear to be shrugging off the unhealthy information, seeing it as a short-term problem. For a lot of retailers, the silver lining seems to be the endurance of client demand.

Lululemon mentioned gross sales within the November-to-January quarter will come in on the low end of its previous expectations as a result of shorter hours at some areas tied to labor constraints.

Equally, Lands’ End mentioned it has had a tough time hiring, whereas Abercrombie & Fitch minimize its fiscal fourth-quarter income estimates because it didn’t have enough merchandise in stock to satisfy client demand.

Individually, Urban Outfitters mentioned shopper visits to its shops did not choose up in December prefer it had deliberate, however famous upticks in web site purchases.

The underwhelming stories did not appear to have an effect on their shares, nonetheless. Abercrombie shares had been up 8% midafternoon Tuesday, whereas American Eagle Outfitters rose about 3% and City Outfitters topped 2%. Lands’ Finish was up virtually 4%.

However the newest surge of Covid circumstances in america is certain to maintain rattling the retail trade within the coming weeks.

On Monday, roughly 1.5 million new cases of Covid-19 had been reported, in response to knowledge compiled by Johns Hopkins College, pushing the seven-day common of day by day new circumstances to 754,000. What’s extra, hospitalizations are beginning to climb, notably amongst people who find themselves not totally vaccinated.

Whereas these retailers could also be weeks away from releasing full outcomes for the vacation quarter, the revised forecasts and feedback provide analysts and traders a preview of how they wish to enhance enterprise regardless of the pandemic’s lingering influence.

Working further hours

‘A little bit of a deja vu’

“The primary day of ICR 2022 was a little bit of deja vu, with all of us hunkered down in entrance of our computer systems switching from assembly to assembly with the press of a button,” mentioned Dana Telsey, CEO and chief analysis officer at Telsey Advisory Group.

“Sadly, the omicron variant of Covid-19 appears to be having the adverse influence we’ve got all feared on January gross sales and staffing,” she mentioned in a word to purchasers.

City Outfitters reported Tuesday that its gross sales for the two-month interval ended Dec. 31 rose 14.6% from 2019 ranges. Digital gross sales climbed double digits, whereas in-store gross sales fell a low-double-digit share on a two-year foundation, the corporate mentioned.

“We do imagine that omicron is affecting our retailer gross sales. … It is arduous to know the way a lot,” mentioned City Outfitters Chief Monetary Officer Melanie Marein-Efron. “As soon as your shops are limiting their hours of operation of being open, clearly you are limiting customers’ means to get into your retailer.”

American Eagle, which additionally owns the Aerie lingerie model, mentioned it is projecting fourth-quarter gross sales to be up a mid-to-high teenagers share versus final yr. That is beneath the 21.5% improve that analysts had been forecasting, in response to Refinitiv knowledge.

American Eagle did, nonetheless, increase its expectations for 2023 income to $5.8 billion, from $5.5 billion, signaling a perception that the adverse Covid influence will solely be short-term.

“We predict will probably be quick time period, if there’s any influence, and extra remoted in January … perhaps into February,” mentioned American Eagle CFO Mike Mathias, when requested about omicron. “We’re sharing assets, as wanted, between spikes in sure shops.”

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