Christmas came early for retail this year with sales last quarter not just on the rise, but absolutely soaring for some.
Tapestry Inc.’s net revenues increased 21.2 percent, putting the Coach parent on pace to hit its three-year financial goals after only one year. Ralph Lauren Corp. jumped 16.6 percent and Victoria’s Secret & Co. advanced 15.3 percent. Macy’s Inc.’s Bloomingdale’s division saw its comparable sales rise 10.2 percent.
While not every company was in the double-digit club, much of the rest of the industry turned in very respectable results as retailers executed better and with better customer awareness.
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Investments in stores and product hit with American consumers who are still spending consistently despite macroeconomic headwinds and a world in turmoil. Retailers also benefited from easier comparisons as the consumer scene was roiled in April 2025 by U.S. President Donald Trump’s “Liberation Day” tariffs, which have since been struck down by the Supreme Court.
“You can put together a laundry list of retailers that showed strong results,” said Dana Telsey, chief executive officer and chief research officer of Telsey Advisory Group. “Consumers were converted based on newness and innovation, increased marketing from social media and loyalty programs providing retailers with more data on consumers. And there has been more demand for retail space than supply. Hopefully, the back half could see benefits from tariff refunds [for companies]. The demand for newness and innovation is encouraging and retailers are putting it out there. Retailers are agile and know how to navigate through all these headwinds, but they still have to carefully watch these headwinds.”
Telsey said there’s a good chance the positive spending trend will continue, particularly given it’s a year of extraordinary events, with the World Cup happening in North America, the nation celebrating its 250th birthday and the New York Knicks in the NBA championships, raising the spirits of New Yorkers.
“These milestones and events help demand,” she said.
But — and there’s always a but — there are also plenty of reasons to worry the Grinch will come and steal the second half.
Sky-high food and gasoline prices as well as despair over the war with Iran have helped push consumer confidence to an all-time low, according to the University of Michigan’s Surveys of Consumers, which goes back to 1952.
Americans for months have complained about difficulties paying bills and balancing budgets and are increasingly turning to credit cards and buy now, pay later programs. Consumers’ revolving credit, like credit cards, increased at a seasonally adjusted annual rate of 10.4 percent in April.
So there is an undercurrent of industry concern around whether consumers will keep spending as prices get even higher and mortgage rates stay over 6 percent.
But the impact of all that agita still seems to be in the future.
“This is the time to shine,” said Simeon Siegel, an analyst at Guggenheim Securities. “And so if you’re not shining now, that’s a problem. If you are shining now, it doesn’t mean you haven’t written the end of the story either. When everyone’s doing great, you better be doing great. It doesn’t reflect your skill. Your skill shines when everyone’s not doing great.”
Siegel said the very public surge of tariffs last year helped everybody raise prices.
“Starting in the third quarter, retailers are going to have to start anniversarying those price lifts and we are going to start seeing who’s swimming naked,” he said. “In a world where everyone was blessed to be able to charge more, it’s worth figuring out who was able to sell more.
“Looking back over the last few weeks, seeing companies like Ross Stores and Victoria’s Secret tell you that not only did they get price, but they actually saw the majority of their lift come from driving new customers into their fold — that to me seems to be impressive,” he said.
Year-over-year, U.S. retail sales rose 3.7 percent, 4 percent and 4.9 percent in February, March and April, respectively. And the momentum continued in May, when retail sales rose 7.2 percent, though the figures are unadjusted for inflation, which is running at about 3.8 percent.
Buoying those sales was a host of factors.
The surging stock market is soaring to new highs, fueled by investor bullishness over AI. Unemployment is relatively low at 4.3 percent, with the job market adding 459,000 positions through May this year. Also, tax returns are 10 percent higher this year.
The affluent continue to spend, while low- and middle-income shoppers, who are more impacted by higher costs, are still shopping but in a more “choiceful” way. Some retailers, particularly upscaled ones like Nordstrom, Macy’s and Bloomingdale’s, have been capitalizing on the disruption of and downsizing at Saks Global, which is due to emerge from bankruptcy shortly.
Shoppers might also be ready for a little bit of a digital detox.
“I think physical shopping and mall stores are making a comeback,” said Barbara Kahn, the Patty and Jay H. Baker professor of marketing at The Wharton School. “Retailers are asking what customers are looking for, and in one of my classes where there were undergraduate and MBA students, they said they really want the experience of shopping again. If stores can make the experience better, put the fun back into it and provide assortments they’re interested in, they’re very open to more traditional shopping — and stores are listening to them. Definitely Sephora is doing really well. They’ve been bringing in fun brands. People like the service. The store associates are not on commission, so there’s not a hard sell, and it’s just a fun place to shop.”
Kahn also credited Macy’s Inc. for shedding many of its weaker stores and investing in more profitable locations, thereby lifting the performance of the corporation.
Craig Johnson, president of retail research firm Customer Growth Partners, said: “Some sectors such as home improvement and consumer electronics and appliance still lag, but even here we are beginning to see some green shoots as the housing market slowly recovers. Highly discretionary categories, such as apparel and accessories and beauty, are accelerating, with healthy high-single-digit comps, sourced not just from upper-income households, but also from moderate-income consumers — a clear sign that a wider tranche of shoppers are dipping their toes, if not more, in the water.
“The key factors driving the newfound improvement include the dramatic drop in gasoline prices, down almost 40 cents/gallon over the past month, freeing up some $6 billion a month now available for discretionary spending; continued solid growth in the job market both in new jobs and in improving wage growth — the largest source of all top-line growth — and record increases in the stock market and household portfolios driving both true luxe and near luxe demand,” he said.
That doesn’t mean retail is out of the woods yet, he said.
“The apparel categories are beset with a pervasive lack of newness, such as the athleisure sector, which depended for many years on category and geographic growth but is facing serious overcapacity issues, with little in the way of traffic-driving innovation and excitement,” Johnson said. “More broadly, the retail sector continues to face uncertainty on the global stage, certainly keeping some shoppers still on the sidelines, particularly for big-ticket items.”
