Earnings: Shares for CVS, Abercrombie, Urban Outfitters rise, American Eagle stock down

Yahoo Finance Live’s Julie Hyman and Brian Sozzi break down the earnings reports for CVS and retailers Abercrombie, Urban Outfitters, and American Eagle Outfitters.

Video Transcript

JULIE HYMAN: Four companies coming out this morning tweaking their forecasts, and one of them is CVS. Now, this also is linked to JP Morgan Health Care Conference that's been ongoing. CVS coming out and raising its forecast for the full year of 2021. The shares are up just up about 9/10 of 1%. And by the way, it's raising this forecast not even a month before it's set to come out with full earnings, which is February 9th.

But nonetheless, the company says now, earnings for the 2021 period are going to be $8.33 to $8.38. $8 was the high end of the former forecast. So obviously, this is a much better than estimated debts-- the adjusted earnings per share range we're talking about, of course. And the company reaffirming its full year 2022 guidance, as well. Now Soz, this comes on the heels of Walgreen also-- Walgreens also reporting numbers that beat estimates, so it seems like that these companies are really getting a lift here as a lot of people are going to them for things like tests.

BRIAN SOZZI: Yeah, it's all of them. Julie, you're right. You were right to mention-- Walgreens is the ultimate tell on this quarter or this guidance range from CVS. Walgreens out last week, very strong earnings. A couple of weeks before then, Rite Aid shares got hammered on their quarter, but even still their sales were strong. Bottom line is people are going into these pharmacy chains. They're getting their vaccine.

They may do some grocery shopping on the way out because these locations-- the pharmacies have greatly reinvented themselves. You walk in there now, they have coolers. They have-- you can actually do an entire refrigerator full of grocery shopping when you go in there. People, if they're not back in there getting their shots or their boosters, they're in there looking for tests to see if these stores have any more. So there's a lot more traffic coming into these locations.

I would also watch this, too. The likes of Walgreens and CVS have really started to prune, or have begun to prune their store bases to cut costs. I think we're seeing some of the first early signs of those cost savings start to flow through the bottom lines.

JULIE HYMAN: Interesting. So we'll continue to watch that and watch for any comments out of that conference, as well. In the meantime when you look at apparel retailers, man, we've got some interesting forecasts coming out from these companies. And just as CVS is sort of linked to the JP Morgan Health Care Conference, some of these retailers' commentary is linked to the NRF conference, and the ICR conference, and retail conferences that are happening this month, as well.

So Abercrombie and Fitch coming out and saying it's going to fall short of its guidance, but gross profit rate in line with prior guidance. So that seems to be what the company shares are reacting to. Fourth quarter net sales, as you see there, it says will rise 4% to 6%. But the fourth quarter is going to be flat to down 2% compared to 2019 numbers, and the company is talking about inventory problems, which seems to be a really common thread here among the retailers.

BRIAN SOZZI: This is a weird reporting week, Julia. A lot to digest, and to be perfectly honest, I'd need a little more time to just dig into some of these reports. But I will say this, Abercrombie and Fitch, we are seeing the stock rise here in the premarket. CO Fran Horowitz, friend of the show, noting that sales have accelerated in January. That is a different tone from Abercrombie compared to what we heard from Lululemon yesterday, or earlier in the week, noting that traffic has been pressured in January. Different change-- different tone than what we heard from Bath and Body Works, who has noted pressure in their sales in January.

So Abercrombie and Fitch looks like they have started to get more inventory into the stores. Demand appears to be strong, and they're seeing an acceleration in sales pretty similar to what we're hearing from rival American Eagle Outfitters this morning, too, Julie. Strong holiday quarter. Company really coming out, materially raising its longer term or 2023 growth targets in terms of sales and operating profits. So if you're looking for winners right now, it appears to be an American Eagle and an Abercrombie and Fitch. As trends change, people go back to those '90s looks, or young adults goes back to those '90s looks. Those two appear to be winners, and you're seeing some other names not really be winners in this environment.

JULIE HYMAN: Yeah, although American Eagle not getting bid up so much this morning. One other commentary that stood out to me from Fran Horowitz over at ANF, we did not have enough inventory to keep pace with customer demand in the last quarter. So presumably if they can get that inventory up, that should help matters. We were also showing Urban Outfitters just there, as well, and Urban is another of the companies that came out with those sort of preliminary numbers.

Those shares are trading higher by about 7/10 of 1%. Urban reporting some numbers this morning, saying its holiday sales were up by almost 15%, and Urban, to me, was also interesting if you looked at the breakdown. 47% increase in comps at free people. 15% in anthropology, and only 3% at that namesake Urban Outfitters brand. So there it's-- it's not even just differentiation from company to company. It's differentiation within the same company from brand to brand, Soz.

BRIAN SOZZI: Yeah, a lot-- again, a lot going on here, Julie. But I will note this, too. What Urban Outfitters said, they noted a high single digit percentage decline in store sales, physical store sales, because of weak traffic. If you're trying to put all these pieces together, that fits with what Lululemon and Bath and Body Works said. So negative traffic there in stores in large part because of the ongoing pandemic. Surprised to see the stock. It was down in the premarket a good bit. Seeing a little bit of a reversal here. Surprised here given that call out from Urban Outfitters on that negative traffic.