Still, investors aren’t cheering the news. They’re paying closer attention to pressures on profits. While Target’s third-quarter sales were up, its earnings slightly missed the mark. And Kohl’s beat analysts’ quarterly expectations, but its full-year profit outlook was on the low end of Wall Street forecasts.
“I think there has been some skittishness around retail,” KeyBanc analyst Ed Yruma told CNBC. “Like, is this as good as it gets?”
Investors are starting to look past the holiday season and are already thinking about 2019, he added. There’s the threat of new tariffs on Chinese goods going into place next year, along with predictions the economy may cool and force consumers to pull back on spending. Retailers, meanwhile, are still expected to invest in their websites and mobile apps to keep pace with Amazon and other major e-commerce brands.
“You grow online … you’re going to have some expense structure against your margin because you’re doing things,” Jan Kniffen, CEO of consulting firm J Rogers Kniffen WWE, told CNBC’s “Power Lunch.” “That’s a problem with the group, whether you’re Macy’s or Walmart or Target … You’re having some expenses go up because of all the great online business you’re doing, but that’s what you have to do to grow.”
Spending online is predicted to climb more than 14 percent this holiday season, compared with growth of 2.7 percent at bricks-and-mortar retailers. But the majority of retail sales in the U.S., nearly 90 percent, still takes place at stores, according to the U.S. Commerce Department.
Looking past the holidays, the first and second quarters for retailers across the board should be “pretty good,” Kniffen said. But, “at some point the tax law effects start to slow down, and we’ll start to see that in the business.”