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U.S. Luxury Retailers Lean On Affluent Customers To Avoid Inflation Pain

NEW YORK - Upbeat profit forecast from Nordstrom and Ralph Lauren underscore the edge high - end chain have over the wider U.S. retail industry in an inflationary environment, thanks to the deep pockets of their customer base.

The retail landscape is feeling the strain of decades - high inflation as a sharp increase in prices of everything from TVs toothpaste prompts most consumers to curb their spending habit.

In the past few weeks, major retails chains including Walmart and Trget have reported steep declines in their quarterly due to surging costs of freight and labor as well as consumers trading down to essentials.

Their luxury counterparts, however, have avoided the inflation hit.

'To date, we haven't seen an adverse impact on customer spending from inflationary pressures, which we suspect is due to the higher income profile of our customer base', Nordstorm Chief Financial Officer Anner Bramman said on Tuesday after the company raised its annual profit and revenue forecast.

Ralpha Lauren, which also forecast full - year sales margins above expectations, called their consumers 'resilient', while premium parka maker Canada Goose said 'consumer confidence remains strong'.

'This earning cycle has been showing a dichotomy between higher - and lower - income demographics', BMO Capital Markets analyst Simeone Siegel said.

'Whether that holds in the future remains to be seen but at least for now, companies like Nordstrom are suggesting that they have been more insulated given higher end customers.

But for those retailers that cater to a less - affluent demographic, the impact of four - decade - high inflation was more pronounced in the quarter ended April.

Companies, ranging from Target to Gillette - maker P&G, that were previously successful in passing on higher freight and labor costs to consumer have now started to warn of a push back.

The latest consumer price index jumped 8.3% on an annual basis, while prices for gasoline stand more than 50% higher than a year, according to automobile club AAA.

The change in consumer behavior is forcing retailers to offer more promotions and discounts, while luxury firms continue to shell their products at full price.

Executive at Coach owner Tapestry and Ralph Lauren have said they have enough room to raise prices without seeing a big push back from their more affluent customer base.

European luxury brands including Chanel and Burberry have reported seeing little impact on demand from rising prices.

'We continue to see pricing power across the portfolio...Importantly, we have seen no negative impact on customer demand from these price increases', Tapestry CEO Joanne Crevoiserat said on a post - earnings call earlier this month.



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