Wedbush Favors Off-Price Retail, Says Nordstrom's Search Interest 'Took A Nose Dive'

Department stores continue to underperform Wedbush's greater retail coverage, and Nordstrom, Inc. (NYSE: JWN) search trends “incrementally nose [dived] in recent weeks," the sell-side firm said Monday.

Wedbush continues to favor off-price retailers Burlington Stores Inc (NYSE: BURL), TJX Companies Inc (NYSE: TJX)'s TJ Maxx, Ross Stores, Inc. (NASDAQ: ROST), Old Navy, Childrens Place Inc (NASDAQ: PLCE) and American Eagle Outfitters (NYSE: AEO), based on compelling search insights and margin-accretive promotional strategies, analyst Jen Redding said in a note. 

Old Navy search trends saw the most meaningful growth year-over-year, inflecting shortly after the company reported poor first-quarter earnings, the analyst said. 

“A positive inflection in search trends- from down 7.07% y/y in May to +22.73% y/y following the Holiday - signals a likely comeback to us." 

Overall, the Independence Day winners were American Eagle, Children's Place and Old Navy, according to Wedbush. 

Promotional offerings at Urban Outfitters, Inc. (NASDAQ: URBN), Hollister and Gap Inc (NYSE: GPS)'s Gap Stores show steeper discounting year-over-year, potentially driving revenues but likely at a cost, Redding said.

“Notably, the Independence Day holiday marks summer [deals] second only to the Black Friday holiday in sales," the analyst said.

"July promotional strategies often set the tone for the rest of the year, making proper analysis of discounts key, as markdowns fuel spending but also dilute merch margin, and risk hooking consumers on sales." 

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