CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

High-end retail stocks Nordstrom and Urban Outfitters show strength despite inflation pressures

By Kevin Donovan

04:00, 26 May 2022

Short Hills Mall, New Jersey
Positive results from Nordstrom and Urban Outfitters shine new light on retail stocks – Photo: Getty Images

Promising quarterly earnings reports from retailers Nordstrom (JWN) and Urban Outfitters (URBN) spiked the respective stocks Wednesday and gave investors hope the retail sector may weather inflationary pressures on apparel prices.

Market-segment bifurcation, however, is emerging among the higher- and lower-end retailers, as buyers from high-income households are less price sensitive for so-called “event-driven” apparel, as social gatherings increase in the summer months.

Nordstrom Inc. (JWN) stock price

After missing analyst estimates, reporting a $0.06 per-share quarterly loss, but topping estimates by 42% with $3.57bn (£2.84bn) in quarterly revenue and increasing full-year revenue guidance 6% to 8% over than 2021, Nordstrom stock rose as much as 13.4% to $23.44 from Tuesday’s $20.67 closing share price.

Urban Outfitters, which missed both top- and bottom-line estimates with $0.33 per share earnings, versus an expected $0.42 per share earnings, on $1.05bn in revenue, missing $1.07bn estimates, saw its stock rise 14.3% to a $20.48 per share from Tuesday’s $17.92 closing share price. Urban Outfitters CEO Richard Hayne said Spring demand was “nicely positive” through the second quarter.

What is your sentiment on JWN?

Vote to see Traders sentiment!

'Event-driven apparel' drives high-end retail

In a retail sector note to investors Wednesday, JPMorgan Securities analysts cited the “sharp acceleration in demand” for “event-driven apparel” driving sales at the high end of retail, as wealthier consumers prepare for social gatherings and summer vacations and people returning to work seek to upgrade their wardrobes.

For example, JPMorgan notes strength in sales for men’s suits at Nordstrom, while Urban Outfitters reported strong sell-through for women’s bottoms tied to a silhouette shift for “skinny trouser legs.” Additionally both management teams noted “a detectable shift in buying to fashion wardrobing and event-driven consumers return to the office, make summer travel plans and attend social events,” such as weddings.


Urban Outfitters Inc. (URBN) stock price

Urban Outfitters Inc. (Nasdaq: URBN)Urban Outfitters Inc. (Nasdaq: URBN) 2000-YTD - Photo: TradingView

“It was interesting to see Nordstrom give a rather positive earnings report; I know the narrative currently being passed around is that people are buying nicer clothes since they haven’t done so for a couple of years,” said tastyworks CEO Scott Sheridan. “Urban Outfitters actually missed estimates but offered some encouraging commentary, But URBN is more than just clothing so I find the whole nicer clothing narrative a little suspect.”

What is lifting higher-end clothing retailers

Event-driven apparel

Positives: “Dress-up” apparel, resort wear, return-to-work

Negatives: “Basics” apparel, comfort/lounge wear, active wear

Promotional activity

Inventory carryover leading to increased clearance activity, lower margins

Higher-income demographic insulated from inflation

Retailers catering to $100,000 income households cited no inflationary related pressure


14,710.90 Price
+0.190% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0039%
Overnight fee time 21:00 (UTC)
Spread 7.0


1,596.29 Price
+0.100% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 5.40


0.51 Price
-0.620% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01192


26,625.60 Price
+0.150% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 85.00

Gen-Z, Millennial cohorts moderating demand due to inflationary pressure due to younger age and lower income



High-income laterals

JPMorgan increased its full-year 2022 earnings estimate for Nordstrom to $3.20 per share and its December 2022 price target to $22 per share, while maintaining an Underweight allocation.

JPMorgan noted that retailers catering to higher household income (greater than $100,000 per year) consumers were better positioned to withstand inflation-driven price increases, while retailers catering to younger and lower-income consumers are adversely positioned for rising retail prices.

Splitting the retailers into two groups, “Positive High-Income Exposure Laterals” JPMorgan cited Capri Holdings (CPRI), Macy’s (M), Mytheresa (MYTE), Ralph Lauren (RL) and Dillard’s (DDS) as well as Nordstrom and Urban Outfitters as being well-positioned to pass along higher prices.

Macy’s (M) stock price

“Higher income cohorts with consumers eager for a return to normal and attending several events citing no notable inflationary impact to demand,” JPMorgan said in the report.

On the lower end of the spectrum, what it calls “Negative Laterals” falls American Eagle Outfitters (AEO), The Gap (GPS) and Ollie’s Bargain Outlet (OLLI), as being “adversely positioned.”

“We read the consistent Gen-Z/Millennial inflationary impact commentary as a negative lateral...adversely positioned tied to a ‘discretionary squeeze’ at the low-income customer demographic.”

Reasons to remain skeptical

Tastyworks’ Sheridan remains skeptical on retail. “We have some more retail earnings coming this week in Macy’s and Gap Stores,” Sheridan added. “I’ll be watching to see how their numbers shake out and what type of forward-looking commentary they offer.”

“If we get some positive news from the remaining retailers, it may end up being the sector isn’t in the bad shape a lot of people fear.”

Markets in this article

316.10 USD
1.29 +0.420%
316.10 USD
1.29 +0.420%
10.91 USD
0.04 +0.370%
10.91 USD
0.04 +0.370%
52.45 USD
0.01 +0.020%

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 555.000+ traders worldwide that chose to trade with

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading