Inflation drives consumer "bifurcation" for Urban Outfitters

Urban Outfitters, the retail holding company, has seen a “bifurcation” in consumer habits due to inflation, with younger shoppers at its namesake chain reacting differently to older, more affluent shoppers at its other banners.

Why it matters

Inflation does not impact everybody in the same way: more youthful cohorts, for instance, may not have the same levels of earnings and financial security as older customer segments. As such, brands need to understand the particular needs of these distinct groups.

Younger consumers feel the pinch

• “We do believe that there is a sort of bifurcation that has happened as a result of the inflation,” Richard Hayne, Urban Outfitters’ CEO, said on an earnings call with investors.
• Its eponymous brand is frequented by younger people who are often “on their first job, or maybe a second job, and they're making a little bit less money,” he added.
• The income boost provided by stimulus payments from the US government last year has not been replicated, he noted, hurting the disposable income of these shoppers.
• “This customer is the most sensitive to inflation … Inflation is really hitting them much harder” than the core audience for its higher-end Anthropologie and Free People retail stores, said Hayne.

Events drive spending for higher-income shoppers

• Among the “higher-income bracket [customers] of those two brands, we don't see any signs right now of inflation impacting their buying decisions,” he continued.
• More specifically, these shoppers want to be “out and about”, and are attending weddings and other events. “She's going to spend her money to prepare for those events, so she looks good during the events. That's what's driving her,” Hayne said.
• “These customers are excited for a return to normal. They’re shopping in stores again and are out and about with family and friends, traveling, dining-out, and going to many, many events,” he added.

Sourced from Seeking Alpha