Department stores like Macy's and Nordstrom are bucking gloomy retail trends, and it shows inflation hasn't slowed spending for a large swath of Americans

• Macy's and Nordstrom reported strong earnings and upped their financial guidance for the year.
• They have upscale shoppers to thank, who haven't slowed spending despite record inflation.

Record inflation may be hitting some Americans' finances hard, but higher-income shoppers haven't slowed down — and it's giving some department stores the upper hand.

Amid a dreary few weeks of retail earnings, Nordstrom and Macy's were a bright spot, reporting strong first-quarter earnings despite high inflation and fears of an impending recession. Nordstrom's first-quarter sales exceeded analyst expectations and the retailer boosted its full-year financial outlook; Macy's raised its profit outlook for the year after reporting first-quarter results that surpassed Wall Street estimates.

"While macroeconomic pressures on consumer spending increased during the quarter, our customers continued to shop," Macy's CEO Jeff Gennette said in a statement Thursday.

Other high-end retailers are reporting the same. Ralph Lauren said demand hasn't slowed and called its customer base "resilient." Luxury jacket-maker Canada Goose said its customer confidence is "strong."

So while many Americans are switching to half-gallons of milk to save money or opting for cheaper, private-label brands to save a few dollars here and there, inflation hasn't yet impacted higher earners, who are still shelling out for luxury goods. The retailers who serve those customers have been insulated from inflation-era spending cuts, at least so far, but the retailers caught in the middle are already starting to feel the strain.

An impending retail apocalypse, but not for everyone

Over the past few weeks, Walmart, Target, Kohl's, Gap, Abercrombie & Fitch, and Burlington Stores all reported disappointing earnings.

Some cited high transportation costs as the culprit, while others blamed the comparison to last year, when government stimulus checks meant Americans were flush with cash with fewer ways to spend it. Walmart said its inventory levels are too high and customers are buying fewer items than usual, resulting in a worse-than-expected quarter.

Dennis Dick, a trader at Bright Trading, told Reuters last week that this is "a little bit of a retail apocalypse."

"It was Walmart ... and everybody thought it was a one-off," he said. "Now that Target missed earnings (by) a lot more than Walmart even did, they're scared that the consumer is not as strong as everybody thinks."

But it seems that not every type of consumer is feeling the crunch.

At Nordstrom, shoppers are buying apparel and shoes for social occasions, returning to the office, travel, and just typical wardrobe refreshes, CFO Anne Bramman said during Tuesday's first-quarter earnings call.

"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," she said.

Macy's also made a point to highlight the stability of its higher-income shoppers. At Macy's-owned Bloomingdales, sales jumped 28% during the quarter, more than twice Macy's sales increase during the same period. During the analyst call Thursday, Gennette said the Bloomingdale's brand, which is more upscale than Macy's, is "quite hot right now, and we're really banging on all cylinders."

Gennette said that across Macy's portfolio, which also includes luxury cosmetics and skincare company Blue Mercury, customers with an income of less than $75,000 have been most affected by what's happening in the economy.

"When I look at kind of the mid-tier customer as well as the luxury customer, above $150,000, very healthy, and spend levels were quite strong," Gennette said. "I do think that when you look at the affluent customer, we're not seeing a slowdown there."