KeyBanc Downgrades Nordstrom, Urban Outfitters, Says E-Commerce Pressures Are Only Increasing

The growth of online retailers and subscription boxes means success for traditional retail stores like Nordstrom JWN and Urban Outfitters URBN will be harder fought, according to KeyBanc Capital Markets. 

The Analyst

Analyst Edward Yruma downgraded both Nordstrom and Urban Outfitters from Overweight to Sector Weight.

The Thesis

“Despite sizable e-comm investments, a continued push by Amazon.com, Inc. AMZN into apparel and the data-focused approach of Stitch Fix Inc SFIX necessitate continued investments,” Yruma said in a Monday note. (See the analyst's track record here.) 

Online sales and subscriptions make shopping much less stressful and laborious for consumers, and online retail can be specifically marketed for those with busy schedules, Yruma said. In addition to convenience, certain brands offer a personalized look for the consumer, acting essentially as a personal stylist.

Traditional retail stores are in some ways unable to compete with e-commerce, despite the stability of retail leaders such as Nordstrom and Urban Outfitters, the analyst said.

“Performance at URBN accelerated demonstrably ... and the company should continue to benefit from a favorable fashion cycle," Yruma said. "Comp comparisons will get increasingly difficult in the second half and earnings growth will need to be driven by gross margin expansion." 

Price Action

Nordstrom shares were trading down 2.65 percent at $52 late in Tuesday's session, while Urban Outfitters was trading down 0.24 percent at $45.69. 

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Public domain photo via Wikimedia.