Retailers see staffing challenges as omicron rages, sales taking a hit

A “now hiring” sign is posted on an Urban Outfitters store in San Francisco.

David Paul Morris | Bloomberg | Getty Images

Retail executives presenting at the ICR conference this week are detailing how the highly contagious omicron variant is denting sales and leaving stores and distribution centers understaffed.

But investors seem to be shrugging off the bad news, seeing it as a short-term challenge. Abercrombie shares were climbing nearly 8% midday Tuesday, while American Eagle was up about 3%. Urban Outfitters rose almost 2%, and Lands’ End was up a little more than 2%.

For them, the silver lining is that consumer demand appears to be intact.

Lululemon said sales in the November-to-January quarter will come in on the low end of its previous expectations as it had to shorten hours at some locations due to labor constraints. Lands’ End said it’s had a difficult time hiring. Abercrombie & Fitch cut its fiscal fourth-quarter revenue estimates because it didn’t have enough merchandise in stock to meet consumer demand. While Urban Outfitters said shopper visits to its stores didn’t pick up in December like it had planned.

These are just a few examples of ways that the latest surge of Covid cases in the United States is sure to keep rattling the retail industry in the coming weeks. On Monday, roughly 1.5 million new cases of Covid-19 were reported, according to data compiled by Johns Hopkins University, pushing the seven-day average of daily new cases to 754,000. While many vaccinated individuals who are infected with the virus say its symptoms are mild, hospitalizations are starting to climb, particularly for those who become sick and are not fully vaccinated.

While these retailers may be weeks away from releasing complete results for the holiday quarter, the revised forecasts offer analysts and investors a preview of what’s to come, and shed light on how the companies are working through these obstacles.

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