3 Retail Stocks Set to Soar After Earnings

Macy's, Abercrombie & Fitch, and Dick's Sporting Goods are reacting to mixed Q1 results and cautious outlooks, reflecting the impact of tariffs and consumer demand. Macy's beat earnings expectations but cut its full-year profit forecast, while Abercrombie & Fitch surged on strong earnings but also trimmed its full-year outlook due to tariffs. Dick's Sporting Goods reported better-than-expected earnings and reaffirmed its full-year outlook, also announcing plans to acquire Foot Locker.

Analysis

The U.S. retail sector presents a nuanced outlook, as evidenced by the divergent first-quarter performances and cautious guidance from Macy’s (M), Abercrombie & Fitch (ANF), and Dick’s Sporting Goods (DKS), all grappling with tariff implications and evolving consumer behavior. Macy’s exceeded Q1 expectations with adjusted earnings of 16 cents per share on $4.60 billion revenue, yet subsequently lowered its full-year profit forecast due to anticipated tariff hikes and increased promotional spending necessary for its ongoing turnaround, which includes closing approximately 150 stores and focusing on its Bloomingdale’s and Bluemercury banners; its stock, though up 4% premarket, remained down over 28% year-to-date. In contrast, Abercrombie & Fitch delivered a blowout Q1, with earnings of $1.59 per share on $1.1 billion revenue, propelling its stock up over 28% premarket despite a 48.4% year-to-date decline prior to the announcement; ANF issued upbeat current-quarter guidance but also trimmed its full-year profit forecast, citing an expected $50 million tariff impact. Dick’s Sporting Goods reported strong Q1 results, with earnings of $3.37 per share on $3.17 billion in net sales, both beating forecasts, and reaffirmed its full-year outlook while announcing the strategic acquisition of Foot Locker (FL), signaling confidence despite tariff pressures and a 23.9% year-to-date stock deficit.

Key Decisions for Investors

• Investors should differentiate between retailers based on their ability to manage tariff-related cost pressures and maintain margins, as these factors are significantly influencing full-year profit outlooks despite some Q1 earnings beats.
• Abercrombie & Fitch's significant Q1 outperformance and upbeat current-quarter guidance warrant attention, but the trimmed full-year profit forecast due to a $50 million tariff impact requires careful risk assessment of its valuation post-surge.
• Dick's Sporting Goods' reaffirmed full-year outlook and strategic acquisition of Foot Locker suggest operational strength, however, the successful integration and continued navigation of tariff headwinds will be critical to monitor for sustained performance.
• Macy's lowered full-year profit forecast, despite a Q1 earnings beat, highlights the execution risk in its ongoing turnaround and the impact of promotions, necessitating a cautious approach focused on tangible strategic progress and margin stabilization.