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Such was the case with a number of specialty retailers that reported big earnings declines Wednesday, but still managed to beat Wall Street's expectations.
The better-than-expected results from American Eagle Outfitters, Chico's FAS and, after the market closed, Coldwater Creek and Dress Barn helped send the Standard & Poor's Retail Index up 1 percent to 398.64. The Dow Jones Industrial Average gained 0.4 percent to 12,594.03, while the broader S&P 500 also rose 0.4 percent to close at 1,390.84.
The retailers that reported results said they were able to beat expectations through tighter inventory and expense controls.
But analysts continue to remain cautious going forward.
"We believe that the current macroeconomic environment, including lower housing prices and rising commodity and food prices, coupled with a weak employment picture, will continue to take its toll on discretionary consumer spending," said Elizabeth Pierce, retail analyst at Roth Capital Partners.
Teen retailer American Eagle Outfitters Inc. posted a 44.3 percent drop in first-quarter earnings, hurt by an increase in markdowns and lower-than-expected sales. For the three months ended May 3, net income fell to $43.9 million, or 21 cents a diluted share, from $78.8 million, or 35 cents, in the year-ago period. Analysts were expecting income of 19 cents a share.
Sales for the quarter grew 4.6 percent to $640.3 million from $612.4 million, while total comparable-store sales decreased 6 percent.
While the company saw strength in its men's business, the girls' sector remained challenged, Susan McGalla, president and chief operating officer, said in a call to Wall Street.
The company's contemporary brand, Martin + Osa, showed some improvement during the quarter but continues to drag down earnings, said Richard Jaffe, retail analyst at Stifel Nicolaus.
For the back-to-school season, American Eagle will launch new denim fits for men and women, as well as new washes, silhouettes and fashion details, in an effort to generate renewed excitement in the category, McGalla said.
American Eagle expects second-quarter earnings in the range of 28 cents to 30 cents a diluted share compared with 37 cents in the prior-year period.