A Nordstrom employee fixes a floral dress on a mannequin at a retailer’s department store.
Ben Nelms | Bloomberg | Getty Images
With sweatpants, with blazer, with lipstick and with eye-popping prints on the dress.
Americans are sprucing up their wardrobes and spending more on more clothes, makeup and accessories as they start going out more and going back into offices. Analysts and company executives say the trend is particularly evident among high-income buyers, who are eager to splurge on such items again, even in the midst of rising inflation and an uncertain economy.
“The masks are coming off,” said Messi’s Chief Executive Officer Jeff Janet stood by his sales guidance for the year on Thursday after the company boosted its profit outlook.
The sentiment was echoed by a string of other retailers reporting quarterly results this week, including a range of makeup-and-beauty products upside down beauty and Anthropologie-Parent Company urban Outfitters, He said people are paying to look their best as they step out of the house again.
The latest round of results takes a more nuanced look at the economy after the two largest retailers – walmart And target Downbeat forecasts sent shock waves across the market with warnings that some buyers are becoming more price sensitive amid decades of high inflation.
Officials say rising food and gas prices are troubling low-income Americans, who are holding back from spending. But so far, even the threat of a potential recession isn’t deterring high-income consumers from spending on items they missed out on in the days before the pandemic.
At Macy’s, Janet said shoppers are increasingly spending “hours” browsing in stores, especially in urban markets like New York. A year ago, he said people were more likely to come in and out.
“The luxury customer is back in a big way,” he said in a phone interview.
But Janet notes that shoppers earning less than $75,000 per year are seeking more discounts.
The split in practice is also visible at Urban Outfitters. The company’s Anthropologie range, which is known for playful attire and caters to high-income consumers, saw sales rise 18% in the quarter. In its namesake chain that caters to small shoppers in their first or second job, sales grew just 1%.
“There’s kind of a split,” Urban Outfitters CEO Richard Heyne said on a conference call Tuesday evening.
But even shoppers who are trying to save may be willing to pay for items like shirts or purses—especially if they find a store is running low in stock. According to a retail expert.
“It’s a mindset. It’s a psychology: ‘I want to do things and I need new stuff to wear,'” Jan Niefen, CEO of retail consultancy Jay Rogers Knife Worldwide, told CNBC’s “Squawk Box” this week. But said in an interview. ,
Kniffen said people are more likely to try and save on groceries where the cheaper alternatives can’t differ in quality from name brands: “Substitution at the grocery store is so easy,” he said.
Makeup chain Ulta Beauty also easily beat expectations of a Wall Street sale this week, with shoppers buying items to pamper themselves and get ready for social gatherings. The company raised its full-year outlook after a 18% increase in first-quarter sales at established locations from a year earlier.
“There are new trends coming out in makeup that we’re excited about, definitely a push towards bold looks, bright, glam, glitter,” said Ulta CEO Dave Kimbell. “People are ready to go out into the world and that’s shown in looks.”
Kimbell said makeup is seen as an affordable indulgence, even when people are on a tight budget. clothing retailer Express It’s also benefiting from people’s eagerness to get out and remodel, with same-store sales up 31% in the quarter.
“One of the major fashion trends among women right now is head-to-toe colored suits,” Express CEO Tim Baxter said in a phone interview. “We haven’t been in that kind of fashion cycle for long.”
The shifting behavior means that retailers that sell more casual clothing, such as pajamas and sweatsuits, may now suffer more losses than their competitors after seeing an increase in sales when people were hunkering down at home.
Some are now saddled with the pandemic-friendly clothing list at a time when people were looking for comfort. Those items may eventually require a hefty discount.
American Eagle said Thursday that demand in the first quarter was “significantly below” its expectations and lowered its profit forecast for the year. Inventory was up 46% compared to a year ago. The company’s Erie division sells casual clothing, workout gear, and lingerie to teens and younger women.
Abercrombie & Fitch also said Inventory was up 45% Cut your fiscal first quarter and your sales forecast for the year from a year ago. And Gap’s first-quarter sales fell, which was pulled down by Old Navy.
“Last year, we won big with Active & Wool, and Kids & Kids, which is our sweet spot for Old Navy,” Gap CEO Sonia Singhal said in a phone interview. Weddings, special occasions and the return of office life are now putting pressure on those categories, he said.
Gap’s inventory was up 34% in the period, and the company slashed its profit guidance for 2022. Only its Banana Republic chain, which caters to a high-income customer, reported a jump in same-store sales.
At an Old Navy store Singhal visited recently, where the median income in the area is around $100,000, she said buyer behavior hasn’t changed much. But in another location where the median income in the area was about $50,000, she said the financial pressures are evident.
“There’s a lot of focus on value for money,” she said, adding that people aren’t coming as often either.
Stacey Widlitz, president of retail consulting firm SW Retail Advisors, said the mixed results across the industry reflect how the economy is affecting people as they emerge from the pandemic.
“It’s a change in spending. It’s a behavior change. And it’s hitting different companies differently,” she said.
—CNBC Melissa Repko contributed to this reporting.