Nordstrom cuts annual profit outlook as off-price Rack sales fall


Article content

Nordstrom Inc slashed its annual profit forecast after heavy discounting failed to sway people shopping at its off-price Rack stores, leading to weak holiday sales and pushing its shares down 6% in after-hours trading on Thursday.

The company said it now expected annual revenue growth to be at the low end of its previous expectation of 5% to 7%. Net sales at Nordstrom Rack fell 7.6% in the nine weeks to Dec. 31, from the nine weeks ended Jan 1, 2022.

Article content

U.S. retailers have been hit by Americans cutting back discretionary spending due to decades-high inflation, and their margins have come under pressure from steep discounts to clear bloated inventories.

Advertisement 2

Article content

Department store peer Macy’s Inc tempered its holiday sales forecast earlier this month, blaming a deeper-than-expected lull in shopping between major holidays such as Black Friday and Christmas. Athleisure chain Lululemon Athletica Inc warned of a margin squeeze for the quarter.

People also pulled ahead purchases to as early as October, when retailers were offering higher discounts, leading to weaker-than-expected holiday sales, data from the National Retail Federation showed on Wednesday.

Nordstrom, though, is doing worse than rivals.

It has had to offer more markdowns than planned and its Rack banner is still facing inventory mismanagement and merchandising problems triggered by supply-chain issues over the pandemic, when it had a severe shortage of women’s clothing and shoes.

Advertisement 3

Article content

“They have had chronic merchandising missteps and just cannot seem to get any form of consistency at Rack,” William Blair analyst Dylan Carden said.

Nordstrom now expects adjusted earnings per share of $1.50 to $1.70 for fiscal 2022, compared with its prior outlook of $2.30 to $2.60.

Still, this year could offer some hope for Nordstrom and other retailers, analysts said, pointing to easing inflation, improved inventory levels and normalizing freight and labor costs.

“Going into 2023, it gives me some confidence that even if the first half is kind of weak, maybe it’ll start to look better in the second-half of the year,” Morningstar analyst David Swartz said. (Reporting by Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila and Devika Syamnath)


Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.


Source link

Comments are closed.