Younger shoppers say their clothes are outdated, and Jefferies says Nordstrom is best suited to the “upcoming wardrobe refresh.”

High-end department store Nordstrom Inc. has been upgraded to “buy” by Jefferies, saying the chain’s more affluent customers are better protected from a downturn and that it’s best geared towards an “upcoming wardrobe refresh” among younger shoppers be.

The banking group downgraded Kohl’s Corp. However, he came down to hold and said the department store’s sales and margins needed to strengthen. The analysts who published the rating changes in a research note on Wednesday maintained their “buy” rating on Macy’s Inc.

Analysts also lowered their earnings-per-share forecasts for these chains, citing “spending pressure risk” over the next year. Jefferies has lowered its 2023 earnings per share guidance for Nordstrom and Macy’s to $2.85 and $3.96, respectively. They lowered estimates for Kohl’s by 28% to $3.19.

But amid concerns about consumer demand, they said Nordstrom will likely do better than its department store peers.

“We recognize we could be early, but the higher-income consumer base is a structural advantage during economic downturns, and excess inventory in the industry could benefit Rack’s merchandise woes more than expected,” Jefferies analysts told Ashley Helgans and Blake Anderson on Nordstrom in the message.

The analysts also raised their price target for Nordstrom JWN,
to $24. Shares rose 2% on Thursday.

Jefferies also said that a survey it conducted of 850 customers found that about 70% of Gen Z and Millennial respondents “reported that their closets have gone out of style and are planning to update their closets in the future.” refresh in the next few months”. Wealthier consumers who took part in this survey said they plan to spend more on clothes and shoes in the next six months.

With that in mind, the analysts said Nordstrom was “best placed to be a part of an upcoming wardrobe refresh,” adding that the chain’s customers tend to be younger and more affluent than Macy’s M.
and Kohl’s KSS,

As for Kohl’s, Jefferies said the department store’s planned expansion of its Sephora offering makes sense. However, they said results and financial targets could come more slowly given the current retail and economic environment. Kohl lowered financial guidance last month after rising prices hurt demand from the chain’s middle-income customers.

Jefferies lowered its price target on Kohl’s to $29. The stock lost 0.3% on Wednesday. Macy’s added 0.3%.

Wall Street has focused on retailers’ abilities to manage inventory and costs in recent months, after rising inflation prompted shoppers to prioritize buying basic items like groceries and gas over things like clothing.

Nordstrom stock is down about 19% so far this year. Kohl’s is down 42% during that time, and Macy’s is down 37%. The S&P 500 SPX,
is down 18% year-to-date. Younger shoppers say their clothes are outdated, and Jefferies says Nordstrom is best suited to the “upcoming wardrobe refresh.”

Brian Lowry

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