Investors are hearing from more specialty retailers. Shares of Foot Locker (FL) plunged in early trading after reporting a nearly 10% year-over-year drop in revenue and slashing its guidance. It's a different story for Abercrombie & Fitch (ANF), which reported quarterly results that crushed analyst estimates. Yahoo Finance Live breaks down what these retail earnings say about the state of the consumer.

Video Transcript

JULIE HYMAN: We got results from some specialty retailers this morning-- Foot Locker, Abercrombie. And just to run through the sort of top line takeaways from these companies because we're seeing very different obviously stock reaction, the retailer Foot Locker, that is reporting an almost 10% year over year drop in revenue in a second quarter down to $1.86 billion, which was below analyst expectations. Comparable sales fell over 9%. The company slashed its full year guidance. It blamed a softening consumer and changes in its vendor mix.

On the flip side, Abercrombie came in with a beat in earnings and revenue. Also, it raised its net sales outlook, expecting a rise of about 10% this year. Its previous forecast was for a gain of 2% to 4%. And Abercrombie now expects growth to be driven by new styles and back-to-school sales.

By the way, Yahoo Finance executive editor Brian Sozzi is going to be speaking with Abercrombie and Fitch CEO Fran Horowitz today. You can watch that at 4:15 PM Eastern, so that should be very interesting. But just to sort of give, again, the top line here, man, it is confusing out there because you have Foot Locker following on Dick's yesterday and Macy's, so some terrible numbers from some of the retailers.

But then you have an Abercrombie, you have Urban Outfitters, which we're going to talk about later, and you have Kohl's doing OK. So it's very interesting here. I mean, the Foot Locker one really does stand out for just the sheer-- I'm just going to say terribleness of it. I mean, it was a very bad report.

BRAD SMITH: It was. You know, they said that they're seeing increased promotions-- are having to enact increased promotions amid some of the continued consumer softness. And just anecdotally, I walk in a Foot Locker store maybe three or four times a week sometimes just because I have nothing better to do but other times because I'm actually looking for something that perhaps just dropped that I saw in the direct-to-consumer digital kind of storefronts that one of the brands themselves may offer.

And I say, all right, if I can't get it from that brand, then maybe Foot Locker has it. And then you start to see where those sales are actually taking place because it's so eye-popping. They've got signs in the front of the store saying, Nike inventory, a bunch of basketball shoes on sale.

So when you kind of take a step back and for an extended amount of time continue to see that same type of promotional cycle being pushed forward, it makes you wonder at what margin, at what full price are they actually able to appreciate not just the inventory that they've taken on as wholesale but then additionally being able to move that out the store as well. And I think that's a larger inventory issue that they haven't been able to manage as well as some of the other retailers that we've talked about [INAUDIBLE].

JULIE HYMAN: Yeah, I think that's true. I think there are some overarching themes that are affecting all the retailers.

BRAD SMITH: It's a shift in what consumers are buying too.

JULIE HYMAN: Even the retailers that are doing better are discounting. Everybody's discounting.

BRAD SMITH: Yeah.

JULIE HYMAN: Discounts are back full stop. That's happening, right? Shrink is a problem for most retailers-- shrink being the euphemism that retailers use for theft usually is what that has to do with. So those are the two things that do seem to be affecting. Inventory does seem to be getting cleaner and in better shape at most retailers. Even at Foot Locker, it did see a better inventory, right? Kohl's saw inventory down 14%.

So the swing seems to be just simply do people want to buy the stuff? Are they seeing it as a good value, and are they going in the store? In the case of Abercrombie, they seem to be going in the store. In the case of Kohl's, they're going in the store to buy makeup at Sephora it looks like and Kohl's is sort of leaning into that, as you pointed out this morning as we were chatting about it. So you know, that's sort of the differentiator here.

BRAD SMITH: Yeah, they opened up 200 Sephora Kohl's shops-- an additional 200 Sephora Kohl's shops there. And I think that's amazingly important here as we look across what the little luxuries are that consumers will continue to look at as small purchases but make you feel good. My makeup makes me feel pretty good every day. I put it on right before the show. I don't quite go to Sephora all the time. But at the same instance here, I think for Kohl's, it's smart to lean further into that partnership.

And then just lastly on Abercrombie & Fitch, I think what they're doing in the management structure for this team and then actually looking across all of the brands that they do have, whether it's Gilly Hicks or trying to make Hollister hip again-- look, I don't know how many people are out there still buying ripped jeans. I think it's an issue and a hazard if I'm playing as many sports as I am. But at the end of the day, I'm not the consumer they're going after, and I think they've done a good job in trying to revitalize some of those core brands like Abercrombie and then even further into some of the subsidiaries there too.