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

A sign saying “Now Hiring” is posted in an Urban Outfitters store in San Francisco.

David Paul Morris | Bloomberg | Getty Images

Retail executives presenting at the ICR virtual conference this week explain how the highly contagious Omicron variant drives sales and leaves stores and distribution centers understaffed.

But investors seem to be shrugging the bad news as they see it as a short-term challenge. For many retailers, the silver lining is that consumer demand appears to be well intact.

Lululemon said sales will be in the November-January quarter are at the lower end of their previous expectations because working hours had to be reduced at some locations due to a lack of labor. Lands’ End said it had been a difficult time hiring. Abercrombie & Fitch lowers its sales estimate for the fourth quarter because it didn’t have enough goods in stock to meet consumer demand. While Urban Outfitters said shoppers’ visits to its stores had not increased as planned in December, and were instead purchased on its websites.

Still, Abercrombie shares rose nearly 8% on Tuesday lunchtime, while its rival American Eagle Outfitter increased by about 3%. Urban Outfitters ‘stock rose nearly 2% and Lands’ End rose a little over 2%.

And these are just a few examples of how the recent surge in Covid cases in the US is sure to continue to rock the retail sector in the coming weeks. On Monday, around 1.5 million new cases of Covid-19 have been reported, according to data from Johns Hopkins University, bringing the seven-day average of new cases to 754,000 daily. While many vaccinated people infected with the virus say symptoms are mild, hospital admissions are on the rise, especially for those who get sick and are not fully vaccinated.

While these retailers may be weeks away from releasing full Christmas quarter results, the revised forecasts and comments provide analysts and investors with a preview of what’s to come. Companies from Lululemon to American Eagle are also shedding light on how to deal with the effects of omicron.

Work overtime

Lands’ End chief financial officer Jim Gooch said Tuesday that some employees had been working overtime in the past few weeks.

“We know that the work will be a big problem. … We hope this will normalize in the future, but this year has been a challenge,” he said during an ICR presentation. “And that’s why the teams are doing what they can to try to come out on top this year.”

Abercrombie & Fitch said Tuesday it was able to drag workers from one of its brands into stores of another brand in order to keep the doors open when workers call in sick. The company also owns Hollister and Gilly Hicks.

“In a mall where we have multiple brands and we have a staffing problem because we have a store that might come into contact with Covid, we can borrow staff from the other stores and that has helped us tremendously,” said Abercrombie Chief Executive Fran Horowitz, during an ICR presentation.

As a result, Horowitz said, Abercrombie has not had to close any stores entirely due to Covid outbreaks. However, it has temporarily reduced opening hours in some locations, she said. That’s an approach that companies take off Macys to gap to Nike also recently took.

“A little déjà vu”

“The first day of ICR 2022 was a little déjà-vu where we all sat in front of our computers and went from meeting to meeting with one click,” said Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group.

“Unfortunately, the Omicron variant of Covid-19 appears to have the negative impact we all feared on sales and staffing levels in January,” she said in a statement to customers.

Urban Outfitters reported Tuesday that sales for the two-month period ended December 31st were up 14.6% compared to 2019. Digital sales grew double-digit during this period, while in-store sales declined a low double-digit percentage on a two-year basis, the company said.

“We believe omicron affects our store sales … It’s hard to say how much,” said CFO Melanie Marein-Efron during an ICR presentation. “As soon as your stores start restricting their hours of operation, you are clearly limiting the ability of consumers to get into your store.”

American Eagle, which also owns lingerie brand Aerie, predicts fourth-quarter sales will increase a medium-to-high percentage of teenagers year over year. According to refinitive data, this is less than the 21.5% increase forecast by analysts.

However, American Eagle raised its expectations for sales in 2023 from $ 5.5 billion to $ 5.8 billion, suggesting the effects of Covid will be temporary.

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

Disney will not attend CinemaCon in-person as delta variant rages in Las Vegas

Signage outside the Caesars Palace Hotel and Casino in Las Vegas, Nevada on Sunday, May 02, 2021.

Roger Kisby | Bloomberg | Getty Images

Walt Disney Executives won’t be traveling to Las Vegas next month to attend the National Association of Theater Owners’ CinemaCon.

The company quoted growing concern about the Covid-19 Delta variant why it skips the annual meeting of cinema owners and Hollywood studios at Caesars Palace, according to a report by The Hollywood Reporter. Disney will be showing one of its upcoming films rather than giving a staged presentation.

The news comes almost a week later NATO has publicly condemned Disney’s day-and-date disclosure from “Black Widow”. It’s unclear if this was a factor in the studio’s decision.

Disney representatives were not immediately available for comment.

For a decade, CinemaCon has been a top-class event for studios, theater owners and the media to meet, network and exchange upcoming content and cinema innovations. However, the pandemic sidelined last year’s conference and could still affect this year’s event.

As of Friday, the other major studios are continuing their efforts to host personal presentations, although fewer stars are expected to be present during the four-day convention.

While NATO requires attendees to provide evidence of vaccination or a negative Covid test within 48 hours of the event, many in the film industry have raised concerns about the recent surge in coronavirus cases. There are rumors that other studios that weren’t there before Disney left may follow suit.

Last week the White House declared southern Nevada, which includes the city of Las Vegas, a “sustainable hotspot” for the virus. This means the area has a high number of cases and there is a risk that healthcare resources are limited.

Los Angeles County officials have warned residents not to travel to Nevada and Mask requirement for indoor areas reintroduced for all vaccinated and unvaccinated. Las Vegas doesn’t require tourists to wear masks indoors, however.

Representatives from the National Association of Theater Owners declined to comment.