The gap is strong and Foot Locker’s earnings are not…

Retail’s biggest winners in first-quarter earnings did not grow as consumers suddenly spent more on discretionary items — because they performed well and money-strapped shoppers preferred them over competitors.

If there’s one takeaway from the results posted by the biggest US retailers over the past few weeks, it’s that shoppers are still spending — but more selective about where.

Feeling sticky inflation, high interest rates and a tougher-than-real economy, consumers are prioritizing purchases that have a combination of value, convenience and fun.

A rich company Abercrombie & Fitch, TJX Company and gap impressed Wall Street with their results, while others like it Kohl’s, American Eagle and Target disappointed.

Take the Gap and Foot Locker – two trusted winners who sent results on Friday. The two retailers are in the midst of ambitious turnaround plans and are doing better than expected thanks to new strategies they have implemented.

Gap posted consistent sales for all four brands — Athleta, Old Navy, Banana Republic and its namesake banner — for the first time in “several years,” beating Wall Street expectations across the board, the company said.

For years, Gap has been losing market share to formidable competitors. But under new CEO Richard Dickson, a marketing guru credited with reviving the Barbie franchise, the clothing chain has focused on financial rigor, brand storytelling and product development. In less than a year, Gap’s sales and profits improved, and the brand began to become part of the cultural conversation again.

A few weeks ago, actor Anne Hathaway went to a Bulgari party wearing a white Gap dress designed by the company’s new creative director, Zac Posen. Critically, Gap released the $158 dress to consumers, and it sold out within hours. This combination of marketing and exclusive products is what Gap has been missing for a long time, and what its competitors have been doing.

Foot Locker has been in decline for the past few years, but with a combination of the right new strategy and a bit of luck, its turnaround is showing signs of life.

Under CEO Mary Dillon, Foot Locker has been working to transform its stores, where sales account for more than 80%. It has tried to create not only a better shopping experience for consumers but also a better place for critical brand partners.

Instead of two walls of shoes with competing brands mixed together, Foot Locker changes its fleet so that the brand has its own unique look. The new “store of the future” concept at the New Jersey mall brought the strategy to life to become the best store in North America in just a few weeks, Dillon told CNBC, adding that the brand is happy with the new design.

The shift couldn’t have come at a better time. For years it has been Nike’s strategy to cut out wholesalers and sell directly to consumers, the retailer has realized it has gone too far and is now changing course.

With updated stores and better product displays, consumers are also converting more, and paying full price – even Foot Locker’s lower-income shoppers.

“Our consumers … this is a very important category for them. So if people have discretionary income, it may be limited, but you will prioritize where you spend it, right?” Dillon said. “We’re proving that people are willing to spend the full price, but you have to have the right product and serve it up in a way that makes it attractive, right? So that’s where all the customer experience is really important.”

elsewhere, Dick’s Sporting Goods posted a solid first-quarter report Wednesday, as executives said average selling prices and transactions rose and there were no signs of consumers trading down for cheaper options. That may not mean shoppers are spending more, however: Dick’s has long been considered a best-in-class carrier that offers a solid shopping experience, meaning it wins even when consumers choose to shop.

Two retailers that don’t have a good spot – American Eagle and Kohl’s – tells about running a bad or losing trend.

American Eagle handily beat earnings estimates thanks to a new strategy designed to boost profitable growth, but fell short in revenue and issued cautious guidance that was slightly below Wall Street’s expectations.

American Eagle president and executive creative director Jennifer Foyle told CNBC that the brand is working to eliminate things that no one buys and find things that do. He said the retailer had focused heavily on jeggings, but now they have them.

During a store visit at the American Dream mall in New Jersey on Thursday, a colleague told CNBC that the location does not have cheap and baggy stores, and that it is only available online. Meanwhile, there is a wall of jeggings. However, denim was a strong performer for the company during the quarter, and it has a variety of other styles that resonate with customers at these locations, the company said.

Denim is having a moment with the buyer. Search rates for denim reached a peak in the 20-year data set, especially for categories like tops and dresses, according to Morgan Stanley research notes.

Kohl’s has missed the mark in a more meaningful way. The retailer posted bleak numbers on Thursday, as earnings and revenue fell short of expectations. It cut its full-year forecast and its stock fell more than 20%, the largest percentage decline in a stock.

The weak results reflect the challenges retailers still face: Keeping up with trends and staying relevant.

CEO Tom Kingsbury told CNBC that he expects the “head-to-toe” denim trend to play a role in the back half of the year, but it may not be in style when Kohl’s will add to its clothing line. shelves.

“Denim is an OK business for us. I mean it’s really not the most important time for denim,” said Kingsbury. “We sell shorts and shirts. And other, you know, warm weather products.”

Gap, one of the long-time denim leaders, doesn’t seem to be worried that denim is falling out of favor as the weather gets warmer. CEO Dickson said the company is ready to launch an “exclusive lightweight denim fabric” called “Ultra Soft” in time for summer.

Failing to chase trends has been an ongoing problem for Kohl’s aging department store. Kingsbury told CNBC in March that Kohl’s used to buy products for the junior department catering to teenage girls – one of the most trend-driven areas of its stores – 12 to 14 months in advance. When the garment is on the sales floor, it is “dead on arrival.”

In an era where viral TikTok videos dictate the life and death of trends, it’s more important than ever for retailers to keep abreast of what works with customers and what doesn’t. They are not only competing with legacy players, but also competing for customers with innovative but controversial upstarts like China-based Shein, which can turn its idea into an online product in a matter of weeks.

That’s far from the lead times Under Armour, where it now takes about 18 months to get a product from an idea to the showroom floor. During an earnings call with analysts on May 16, CEO Kevin Plank called the system “uncompetitive in the 2024 landscape” as he outlined plans to streamline the process.

Meanwhile, Abercrombie & Fitch posted another stellar result, although starting to make comparisons more difficult. It has delivered torrid growth in part because the company is responsive to customers and has an agile supply chain that has allowed it to chase trends quickly and efficiently.

It posted its strongest first quarter in history, and now expects sales to grow 10% in fiscal 2024, up from previous guidance of between 4% and 6%.

CEO Fran Horowitz told CNBC that cheap, baggy jeans are also popular with customers. During a recent visit by CNBC to a Hollister store just steps from an American Eagle outpost, many styles of jeans were on display for shoppers as they entered the store.