Despite strong retail earnings, a consumer comeback is not guaranteed.

• Retail earnings for the first quarter are nearing completion, yet consumers are continuing to spend, albeit with greater caution than before.
• Strong results were achieved by Foot Locker, Gap, and Abercrombie & Fitch, as they provided shoppers with a balance of value, enjoyment, and product.
• Kohl's and American Eagle failed to keep up with trends, resulting in their loss.

Despite consumers spending more on discretionary goods during first-quarter earnings, retail's biggest winners are still performing well because they are executing effectively and are preferred by cash-strapped shoppers over competitors.

The main point from the recent spending data of the largest U.S. retailers is that shoppers are still spending, but they are being more choosy about where they spend their money.

Prioritizing purchases that offer value, convenience, and fun, consumers are facing the brunt of sticky inflation, high interest rates, and an economy that feels tougher than it may actually be.

While some companies like , and pleased Wall Street with their performance, others like , and fell short.

Gap and – two companies that posted impressive results on Thursday, despite being in the midst of ambitious turnaround plans. Their success can be attributed to the new strategies they've implemented.

The company reported positive comparable sales for all four of its brands, Athleta, Old Navy, Banana Republic, and its namesake banner, for the first time in "many years," surpassing Wall Street's expectations in all areas.

Under new CEO Richard Dickson, Gap has improved its sales and profits in under a year by focusing on financial rigor, brand storytelling, and product development. As a result, its brands are becoming part of the cultural conversation again.

Recently, actress Anne Hathaway attended a Bulgari party in a white Gap shirt dress designed by the company's new creative director, Zac Posen. The dress, priced at $158, was quickly sold out by consumers after its release. Gap had been missing this combination of marketing and exclusive product drops, which competitors had already been utilizing.

Despite a decline in recent years, Foot Locker is showing signs of a turnaround with the implementation of new strategies and a bit of good fortune.

Under CEO Mary Dillon, Foot Locker has made efforts to improve its stores, which account for over 80% of its sales. The company has aimed to enhance the shopping experience for customers while also creating a more favorable environment for its key brand partners.

Foot Locker is changing its fleet by having each brand have their own unique displays instead of two walls of competing brands mixed together. Its new "store of the future" concept at a New Jersey mall has become its best performing store in North America in just a few weeks, and brands are thrilled with the new design.

Nike is now changing course after realizing that its strategy to cut out wholesalers and sell directly to consumers went too far.

Consumers are increasingly converting and paying full price for products at stores with refreshed displays and improved product offerings, even those with lower incomes such as Foot Locker's shoppers.

"Dillon stated that our consumer prioritizes where they spend their discretionary income, even if it may be limited. We are proving that people are willing to pay full price for the right products, but it is essential to serve them in an enticing way that enhances the customer experience."

On Wednesday, Dick's reported a solid first-quarter performance, with average selling prices and transactions increasing. Despite this, it is unclear whether consumers are spending more overall, as Dick's has a reputation for offering a high-quality shopping experience and can still succeed even when consumers are cautious with their spending.

Denim wars

Two retailers who had poor quarters can be seen as a tale of failing to capitalize on trends or making poor decisions.

Despite beating earnings estimates, American Eagle fell short on revenue and issued cautious guidance that was slightly below Wall Street's expectations.

Jennifer Foyle, the American Eagle president and executive creative director, revealed to CNBC that the brand is concentrating on eliminating unpopular items and delving deeper into the ones that resonate with customers. She stated that the company had previously placed too much emphasis on jeggings but now, low-rise, baggy fits are in vogue.

At the American Dream mall in New Jersey on Thursday, an associate informed CNBC that the store didn't carry the low-rise, baggy fit in-stores, but they were available online. However, there was a wall of jeggings. Despite this, denim remained a strong performer for the company during the quarter, and it offered a variety of other styles that resonated with customers at the location, the company stated.

The popularity of denim among shoppers is on the rise, with search levels for denim reaching their highest point in 20 years, particularly for tops and dresses, according to a Morgan Stanley research note.

Kohl's is falling short of expectations in a significant way. On Thursday, the retailer reported earnings and revenue that were below expectations, and it cut its full-year forecast. As a result, its shares dropped more than 20%, marking the biggest single-day percentage decline in the stock's history.

The company's weak results highlighted the challenge it continues to face: Keeping up with trends and remaining relevant.

According to CEO Tom Kingsbury, the "head to toe" denim trend is predicted to have an impact in the second half of the year. However, by the time Kohl's adds it to its inventory, the trend may already be outdated.

"Kingsbury stated that denim is not the most crucial for their business at the moment. They primarily sell shorts, tees, and warm weather products."

Gap, a longtime denim leader, is not worried about denim falling out of style because it's warmer outside. The company's CEO, Dickson, announced that they will launch an "exclusive lightweight denim fabric" called "Ultra Soft" for the summer.

Kohl's has been struggling to keep up with fashion trends in its juniors department, which caters to teen girls. According to Kingsbury, the department store used to buy apparel for the juniors department 12 to 14 months in advance, but when the clothing hit the sales floor, it was already out of style.

In today's era of viral TikTok videos, it is crucial for retailers to remain attuned to what resonates with their customers and what does not. They must not only contend with established players but also compete with emerging, innovative yet contentious startups such as Chinese-linked Shein, which can swiftly bring a product from conception to market in a matter of weeks.

The lead times at are significantly longer than the industry standard, with it currently taking approximately 18 months to bring a product from conception to the showroom floor. During a recent earnings call with analysts on May 16, CEO Kevin Plank characterized the current system as "uncompetitive in the 2024 landscape" and outlined a plan to streamline the process.

Despite facing tougher comparisons, Abercrombie & Fitch posted another impressive set of results. Its success can be attributed to its customer-focused approach and agile supply chain, which enables it to adapt to market trends swiftly and effectively.

Its strongest first quarter in history has led it to expect a 10% increase in sales in fiscal 2024, surpassing its previous guidance of between 4% and 6%.

Fran Horowitz, CEO of Hollister, revealed to CNBC that low-rise, baggy jeans are highly popular among its customers. Upon entering the Hollister store, shoppers were immediately greeted with an abundance of those style of jeans on display.