Shares of several upscale apparel-focused retailers were trading lower on Thursday afternoon, amid a broad-based market decline after new job-loss and consumer-spending figures were released.
Here's how these three companies' stocks were faring as of 2:15 p.m. EDT on Thursday, relative to their closing prices on Wednesday.
- Nordstrom (NYSE:JWN) was down 6.8%.
- Ralph Lauren (NYSE:RL) was down 8.8%.
- Urban Outfitters (NASDAQ:URBN) was down 7.5%.
Apparel retailers (a category that includes most department-store chains nowadays) have been clobbered since the outbreak of the COVID-19 virus in North America. And for good reason: U.S. Census Bureau data showed that sales of apparel fell by over 50% in March.
April's numbers are likely to be worse, since stores were open for the first half of March. And while some stores in some parts of the U.S. are preparing to reopen in the next couple of weeks, it's not clear whether consumers will be interested in spending money on new clothes -- if they return to stores at all with virus fears still rampant.
It's especially not clear that they will spend money at upscale full-price stores like Urban Outfitters, Nordstrom, or Ralph Lauren's company stores. Historically, full-price apparel retailers have tended to lose market share in recessions, as consumers shop off-price stores instead or simply postpone purchases.
That doesn't bode well for any of these companies. All three should have ample cash to ride out the pandemic and any recession that follows, but all three will have to face consequences later. Nordstrom has already taken on additional debt to pad its balance sheet, while Urban Outfitters was among the first to announce that it won't be paying rent while its stores are closed.
And Ralph Lauren? The preppy icon is in some ways the best positioned of the three to ride out the crisis in the near term, with its solid credit ratings, ample cash, and super-durable brand. But at the same time, it's exactly the kind of brand that tends to suffer during recessions, when consumers make do with more-ordinary labels. It's likely to be slower to recover later in the year.
The good news is that retail-focused investors won't have to wait too long for updates from the management teams at these three companies, as all are expected to report quarterly earnings in May. Urban Outfitters will report on May 19, Ralph Lauren on May 27, and while Nordstrom hasn't yet announced a date, it typically reports late in May.