Retailers see staffing challenges as omicron rages, gross sales taking a success

Retailers see staffing challenges as omicron rages, sales taking a hit

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 are detailing how the extremely contagious omicron variant is denting gross sales and leaving shops and distribution facilities understaffed.

However buyers appear to be shrugging off the dangerous information, seeing it as a short-term problem. For a lot of retailers, the silver lining is that shopper demand seems to be properly intact.

Lululemon stated gross sales within the November-to-January quarter will are available in on the low finish of its earlier expectations because it needed to shorten hours at some areas as a result of labor constraints. Lands’ Finish stated it has had a troublesome time hiring. Abercrombie & Fitch lower its fiscal fourth-quarter income estimates as a result of it did not have sufficient merchandise in inventory to fulfill shopper demand. Whereas City Outfitters stated shopper visits to its shops did not decide up in December prefer it had deliberate, and as a substitute individuals purchased from its web sites.

Nonetheless, Abercrombie shares had been climbing almost 8% noon Tuesday, whereas rival American Eagle Outfitters rose about 3%. City Outfitters’ inventory elevated virtually 2%, and Lands’ Finish was up a bit greater than 2%.

And these are just some examples of ways in which the most recent surge of Covid circumstances in america is certain to maintain rattling the retail business within the coming weeks. On Monday, roughly 1.5 million new circumstances of Covid-19 had been reported, in line with information compiled by Johns Hopkins College, pushing the seven-day common of each day new circumstances to 754,000. Whereas many vaccinated people who’re contaminated with the virus say its signs are delicate, hospitalizations are beginning to climb, significantly for individuals who change into sick and usually are 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 buyers a preview of what is to return. Corporations from Lululemon to American Eagle are additionally shedding gentle on how they’re working by means of any affect from omicron.

Working additional hours

Lands’ Finish Chief Monetary Officer Jim Gooch stated Tuesday some staff have stepped as much as work additional hours in current weeks.

“We acknowledge {that a} massive downside goes to be labor. … We’re hoping that that is going to normalize going ahead, however this yr was a problem,” he stated throughout an ICR presentation. “And so the groups are doing what they’ll to attempt to get out in entrance of that as we go into this yr.”

Abercrombie & Fitch stated Tuesday it has been in a position to pull employees from one in every of its manufacturers to work at one other model’s shops to maintain doorways open when employees name out sick. The corporate additionally owns Hollister and Gilly Hicks.

“In a mall the place we now have a number of manufacturers and we now have a staffing situation as a result of we now have one retailer maybe that will get caught up with Covid, we are able to borrow employees from the opposite shops and that has helped us out tremendously,” stated Abercrombie Chief Govt Fran Horowitz, throughout an ICR presentation.

Because of this, Horowitz stated, Abercrombie has not needed to totally shut any shops as a result of Covid outbreaks. It has, nonetheless, quickly lowered hours at some areas, she stated. That is an strategy that firms from Macy’s to Gap to Nike have also taken recently.

‘A bit of a deja vu’

“The first day of ICR 2022 was a bit of deja vu, with all of us hunkered down in front of our computers switching from meeting to meeting with the click of a button,” said Dana Telsey, CEO and chief research officer at Telsey Advisory Group.

“Unfortunately, the omicron variant of Covid-19 seems to be having the negative impact we have all feared on January sales and staffing,” she said in a note to clients.

Urban Outfitters reported Tuesday that its sales for the two-month period ended Dec. 31 rose 14.6% from 2019 levels. Digital sales during that period climbed double digits, while in-store sales fell a low-double-digit percentage on a two-year basis, the company said.

“We do believe that omicron is affecting our store sales. … It’s hard to know how much,” said CFO Melanie Marein-Efron, during an ICR presentation. “Once your stores are limiting their hours of operation of being open, clearly you’re limiting consumers’ ability to get into your store.”

American Eagle, which also owns the Aerie lingerie brand, said it’s projecting fourth-quarter sales to be up a mid-to-high teens percentage versus last year. That’s below the 21.5% increase that analysts were forecasting, according to Refinitiv data.

American Eagle did, however, raise its expectations for 2023 revenue to $5.8 billion, from $5.5 billion, signaling that the Covid impact will only be temporary.

“We think it will be short term, if there is any impact, and more isolated in January … maybe into February,” said American Eagle CFO Mike Mathias, when asked about omicron. “We are sharing resources, as needed, between spikes in certain stores.”

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