Christmas came early for retailers this year, with sales not only increasing last quarter but, for some companies, outright surging.
Tapestry’s net revenue increased 21.2%, putting Coach’s parent company on pace to meet its three-year financial goals in just one year. Ralph Lauren rose 16.6% and Victoria’s Secret & Co. rose 15.3%. Comparable sales at Macy’s Bloomingdale’s division rose 10.2%.
While not all companies are in the double-digit club, many of the remaining industries have performed very respectably as retailers have improved and customer awareness has increased.
Investments in stores and products hurt U.S. consumers, who continue to spend consistently despite macroeconomic headwinds and global turmoil. Retailers also benefited from easier comparisons after U.S. President Donald Trump’s “Emancipation Day” tariffs disrupted consumer spending in April 2025, but the tariffs were later struck down by the Supreme Court.
“We can put together a huge list of retailers that have performed well,” said Dana Telsey, chief executive officer and chief research officer at Telsey Advisory Group. “Consumers have converted based on newness and innovation, increased marketing through social media, and loyalty programs that provide retailers with more data about consumers. And there is more demand for retail space than supply. Hopefully, we can benefit from duty rebates in the second half.” [for companies]. The demand for newness and innovation is encouraged and retailers are bringing it to market. Retailers are nimble and know how to navigate all these headwinds, but they still need to be careful about these headwinds. ”
Telsey said the positive trend in spending is likely to continue, especially given that this is a year full of unusual events, including the World Cup in North America, the nation’s 250th anniversary celebration, and the New York Knicks winning the NBA championship, which lifted New Yorkers’ spirits.
“These milestones and events drive demand,” she said.
But while there’s always a problem, there’s also plenty of reason to worry that the Grinch will come to steal your second half.
Rising food and gasoline prices and despair over war with Iran have pushed consumer confidence to an all-time low, according to a University of Michigan consumer survey dating back to 1952.
Americans have been complaining for months that they have trouble paying their bills and balancing their budgets, increasingly relying on credit cards and buy-now-pay-later programs. Like credit cards, consumer revolving payments rose at a seasonally adjusted annual rate of 10.4% in April.
So there is an undercurrent of concern in the industry about whether consumers will continue to spend as prices rise further and mortgage rates hover above 6%.
But the impact of this excitement may be a long way off.
“Now is the time to shine,” said Guggenheim Securities analyst Simeon Siegel. “So if you’re not shining right now, that’s a problem. If you’re shining right now, that doesn’t mean you haven’t written the end of the story yet. When everyone else is doing well, you better be doing well. It’s not a reflection on your skills. Your skills shine when everyone else is not doing well.”
Siegel said the very public tariff increases last year allowed everyone to raise prices.
“Starting in the third quarter, retailers are going to have a price increase anniversary and we’re going to see who’s going to swim naked,” he said. “In a world where everyone is blessed with the ability to charge more, it is valuable to understand who has been able to make more sales.
“Looking back over the past few weeks, I see companies like Ross Stores and Victoria’s Secret saying that not just winning prices, but actually a large portion of their growth came from bringing new customers into their companies, and that seems impressive to me,” he said.
U.S. retail sales increased by 3.7%, 4%, and 4.9% in February, March, and April, respectively, compared to the same months last year. And that momentum continued in May, with retail sales increasing 7.2%, but that figure doesn’t adjust for inflation, which hovers around 3.8%.
There were a number of factors driving these sales.
The soaring stock market has hit new highs, driven by investors’ bullish stance on AI. The unemployment rate is relatively low at 4.3%, and the job market has added 459,000 vacancies through May of this year. Additionally, tax returns are up 10% this year.
While the wealthy continue to spend, low- and middle-income shoppers, who are more vulnerable to higher costs, are still shopping, but in a more selective way. Some retailers, especially high-end stores like Nordstrom, Macy’s and Bloomingdale’s, are taking advantage of the collapse and downsizing of Saks Global, which is expected to emerge from bankruptcy soon.
Shoppers may also be ready for a little digital detox.
“I think brick-and-mortar stores and mall stores are making a comeback,” said Barbara Kahn, the Patti and Jay H. Baker Professor of Marketing at the Wharton School. “Retailers are asking what customers want, and in one of my classes, which had undergraduates and MBA students, they said they really want the shopping experience again. Sephora is definitely doing a great job of introducing fun brands. People love the service. There’s no pushy sales, and it’s just a fun place to shop. ”
Kahn also praised Macy’s for cutting many of its underperforming stores and investing in more profitable locations, thereby boosting the company’s performance.
“Some sectors, such as home improvement stores, consumer electronics and electronics, are still lagging behind, but we are starting to see green shoots here as the housing market slowly recovers,” said Craig Johnson, president of retail research firm Customer Growth Partners. Growth is accelerating in discretionary categories such as clothing, accessories, and beauty products, which are sourced from high-income households as well as moderate-income consumers, resulting in healthy low-single-digit competition. Shoppers are dipping their toes in the water, if not more.
“The main factors driving the new-found improvement include the dramatic drop in gasoline prices, which fell about 40 cents a gallon last month, making about $6 billion a month available for discretionary spending, new jobs and improved wage growth,” he said. “Both the job market (the biggest source of all top-line growth) continues to grow strongly, and record growth in the stock market and household portfolios are driving demand for both true and near-luxury goods.”
That doesn’t mean retail is out of the woods yet, he says.
“The apparel category suffers from a widespread lack of newness. The athleisure sector, which has long relied on category and geographic growth, faces serious overcapacity issues and has little innovation or excitement to drive traffic,” Johnson said. “More broadly, the retail industry continues to face uncertainty globally, and it is certain that some shoppers remain on the sidelines, especially when it comes to big-ticket items.”
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