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Why Nordstrom and Other Upscale Retail Stocks Were Down on Friday

By John Rosevear – May 1, 2020 at 4:01PM

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Even if stores reopen soon, will consumers be willing to pay luxury prices?

What happened

Several upscale apparel and retail companies were trading lower on Friday, on investor concerns about the prospects for premium retail following the coronavirus pandemic and a new report that J.Crew is preparing to file for bankruptcy.

Here's where things stood for these companies as of 3 p.m. EDT on Friday, relative to their closing prices on Thursday.

  • Capri Holdings (CPRI 1.15%) was down about 6.5%.
  • Nordstrom (JWN 3.98%) was down about 5.9%.
  • Urban Outfitters (URBN 0.76%) was down about 3.2%.

So what

There was no specific news moving any of these three stocks individually on Friday afternoon. All were down, along with many other retail stocks, on broad concerns about the prospects for brick-and-mortar retail as stores gradually begin to reopen in coming weeks, the prospects specifically for upscale full-price retail given the job losses of the past two months, and concerns about the growing list of retail operators that are reportedly preparing for bankruptcy filings.

Preppy apparel retailer J.Crew has joined that latter list. The Wall Street Journal reported on Thursday night that J.Crew Group, which has $1.7 billion in debt, is in talks with lenders about potential financing for a bankruptcy restructuring. J.Crew had been planning to use proceeds from an initial public offering of its Madewell subsidiary to pay down its debt, but that IPO was canceled in March. 

A Nordstrom sign on the outside of a store.

Nordstrom will reopen soon, but will shoppers return? Image source: Nordstrom.

None of these three companies are in acute danger of bankruptcy. But all have been battered since the onset of the COVID-19 pandemic in North America in March forced most retailers to close their physical stores. 

Capri Holdings, the corporate parent of Michael Kors, Versace, and other luxury fashion brands, saw its credit rating cut to junk levels on April 2 on concerns about the effects of a possible recession that could last into 2021. 

Nordstrom's credit rating was also cut in early April, though not quite to junk levels, after which the company raised $600 million via a bond offering and cut $500 million from its capital-expenditures plan to bolster its balance sheet. 

Urban Outfitters hasn't made any moves to raise cash, but it has made some aggressive moves to cut spending since its stores closed: It was one of the first retailers to declare, late in March, that it won't pay rent while its stores are closed. 

Now what

Investors won't have to wait too long for detailed updates from these three companies' management teams, as all three are expected to report quarterly earnings in the second half of May. Urban Outfitters will report on May 19, Nordstrom on May 21, and while Capri hasn't yet announced a date, it typically reports in late May. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends Nordstrom. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Capri Holdings Stock Quote
Capri Holdings
$43.81 (1.15%) $0.50
Nordstrom Stock Quote
$19.45 (3.98%) $0.74
Urban Outfitters Stock Quote
Urban Outfitters
$21.80 (0.76%) $0.17

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