Rising Retail Expectations

Macy’s (M) shares shot up nearly 20% after the retailer raised its annual profit forecast, helped by strong demand for high-margin apparel from consumers returning to wedding and other social events, even as inflation dampens consumer purchasing power. Macy’s said consumers are also shifting back to in-store shopping from online shopping faster than expected, and are buying more expensive dresses and formal wear.

Top U.S. dollar store chains also raised their expectations for the year, as bargain-hunting Americans increasingly shop at discounters, with the rate of inflation near a four-decade high. Dollar General (DG) shares closed up 15%, and Dollar Tree (DLTR) shares ended up over 21% yesterday.

Beauty products were also a big hit. Ulta Beauty (ULTA) shares jumped nearly 7% after posting strong earnings and higher forecasts. Management expects same-store sales to rise by up to 8% from prior guidance of 4%.

All of this follows debacles for Walmart and Target, after shares sank on disappointing profits hurt by rising inflation costs and supply chain disruptions, along with excess inventories.

"A few key retailers have been able to buck the trend of stalling revenues and squeezed profit margins, as consumers continue to defy expectations. The fact that PCE declined in April from March is a good sign that consumers are weathering the inflationary storm," stated Caleb Silver, Editor-in-Chief of Investopedia.