Fashion’s Fall: Tough Earning Reports Loom

The sinking feeling that so many economists and retail watchers had going into the fall — with inflation spiking and recession looming — has landed in the financial statements and outlooks of even fashion’s strongest players.

Amazon warned last week that its fourth-quarter operating profits could flatline, while Vans- and Supreme-parent VF Corp. cut its annual outlook — for the third time — down to adjusted earnings a share of $2.40 to $2.50 from the $3.30 to $3.40 forecast in May.

More from WWD

• Ralph Lauren RTW Spring 2023

• Arrivals at Ralph Lauren RTW Spring 2023

• Red Carpet Looks at 'The Lord of the Rings: The Rings of Power' L.A. Premiere

That kind of, let’s say, moderation from two of the industry’s largest and best-positioned companies foretells some even tougher quarterly reports from the rest of the industry.

At least 18 companies will weigh in with fresh results over the next two weeks, giving a view on fashion from mall giant Simon Property Group; relative newbie Allbirds Inc.; fashion mainstays Capri Holdings, Ralph Lauren Corp. and Tapestry, and luxury giant Compagnie Financière Richemont.

At least one category, luxury, is expected to continue to do well.

Cartier-parent Richemont reports results for the first half on Nov. 11 — not the latest quarter like the rest of the companies in the spotlight — and is expected to post a 34 percent gain in profits as revenues jump 17.8 percent to 10.5 billion Swiss francs.

As of yet, the Cartier crowd is not feeling the pinch of inflation, as has been evidenced by the results of LVMH Moët Hennessy Louis Vuitton, Kering, Hermès, Ermenegildo Zegna and Brunello Cucinelli.

Simon is also seen performing strongly with consumers now more keen to shop in person after two years of COVID-19 shopping online.

But most apparel and fashion companies are expected to post earnings declines from a year ago, when shoppers were first emerging from the pandemic and Russian President Vladimir Putin was sticking within his own territorial boundaries.

Now, as Steve Rendle, VF’s chairman and chief executive officer, told WWD, “People are pulling in their horns.”

That showed in The Conference Board’s Consumer Confidence Index, which fell to 102.5 this month from 107.8 in September.

“Consumer confidence retreated in October, after advancing in August and September,” said Lynn Franco, senior director of economic indicators at The Conference Board. “The Present Situation Index fell sharply, suggesting economic growth slowed to start [the fourth quarter]. Consumers’ expectations regarding the short-term outlook remained dismal. The Expectations Index is still lingering below a reading of 80 — a level associated with recession — suggesting recession risks appear to be rising.

“Notably, concerns about inflation — which had been receding since July — picked up again, with both gas and food prices serving as main drivers,” Franco said. “Vacation intentions cooled; however, intentions to purchase homes, automobiles and big-ticket appliances all rose. Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers. And given inventories are already in place, if demand falls short it may result in steep discounting, which would reduce retailers’ profit margins.”

Just what all that means for fashion’s bottom line will become more clear as companies weigh in with their earnings reports.

Click here to read the full article.