Shares of Macy’s, Dollar Tree and Dollar General jumped on Thursday after all three retailers reported profits that defied Wall Street’s expectations and cut against recent concerns about spending by American consumers.
The results lifted the stock market, with the S&P 500 gaining 2 percent. The tech-heavy Nasdaq composite, — which has for months been in a bear market, which is commonly defined as a 20 percent fall from a recent peak — rose 2.7 percent. Thursday’s gains put the S&P 500 on track to snap a stretch of weekly losses that had gone on seven consecutive weeks and had pushed the index to the brink of a bear market.
Macy’s shares rose 19.4 percent after the company said profit for its latest quarter more than doubled from the same period a year earlier. Macy’s also raised its profit forecast for the year, saying that shoppers had shifted away from the leisure wear of the pandemic and back to pricier clothing.
“We saw a notable shift back to occasion-based apparel and in-store shopping, as well as continued strength in sales of luxury goods,” Macy’s said in a statement.
Discount chains also beat analysts’ expectations, with Dollar Tree’s profit climbing more than 40 percent in its latest quarter. Dollar General reported that profit fell 18 percent, which was smaller than forecast. Both companies upgraded their sales expectations for the year, and Dollar Tree also raised its forecast for profit growth. Shares of Dollar Tree jumped 21.9 percent, the best performance in the S&P 500, while Dollar General rose 13.8 percent. Other retailers jumped too: An index tracking the consumer discretionary industry, which includes retailers, gained 4.8 percent, making it the best-performing sector of the day.
The better-than-expected results and outlooks could help ease concerns about how supply chain woes and rising prices might hit consumer spending, which accounts for the bulk of economic activity in the United States. Those worries came to the forefront last week after Target and Walmart reported disappointing results and said that inflation had taken a toll on profits.
Costco said profit rose 11 percent in its most recent quarter from a year ago, exceeding expectations. Earlier this week, Nordstrom’s profits and sales came in higher than expected, while Dick’s Sporting Goods said consumer spending remained strong. Nordstrom’s shares were up 5.3 percent and Dick’s Sporting Goods rose 8.2 percent on Thursday, adding to sharp jumps on Wednesday.
Retailers were still striking a note of caution. “We are in the midst of a very challenging time for consumers as many are living paycheck to paycheck,” Richard W. Dreiling, the executive chairman of Dollar Tree, told analysts on a call. “They are facing the highest inflation since the early 1980s, record-high gas prices, the effects from the pandemic, geopolitical uncertainty and much more.”
Lower-income households “are squeezed much more dramatically by high prices for fuel and food and have less for discretionary spending,” said Beth Ann Bovino, the U.S. chief economist at S&P Global. “If you have a clientele that’s leaning toward higher-income households, that retailer can fare better than those who are tied to lower income households.”
Some industry watchers cautioned that earnings reports would likely continue to be mixed from one period to the next.
“The retail business throughout Covid went up, down, sideways, depending on the products involved and the retailers’ capacity to pivot and service customers,” said Mark A. Cohen, the director of retail studies at Columbia Business School. Overall, he said, conditions would remain unpredictable: “Keep your seatbelt fastened and your helmet on, and be prepared for a bumpy ride.”
Coral Murphy Marcos contributed reporting.