In line with other retailers, Nordstrom reported on Tuesday that sales had decreased by almost 7% year over year due to consumers’ tighter budgets and decreased demand.
However, the operator of department stores restated its forecast for total sales for the year, stating that it anticipates a 4%–6% decrease in revenue from retail sales and credit card sales.
It reduced the range of its projected adjusted earnings per share to $1.90 to $2.10, omitting the effects of closing its Canadian retail locations and online store as well as any prospective share buybacks.
Based on an analyst survey conducted by LSEG, formerly known as Refinitiv, the retailer’s performance in the fiscal third quarter was compared to what was expected by analysts:
- Profits per share: adjusted to 25 cents from the expected 13 cents.
- Revenue: $3.32 billion versus the projected $3.40 billion.
Nordstrom’s net income increased to $67 million, or 41 cents per share, in the three months that concluded on October 28 from $20 million, or 13 cents, in the same period the previous year. In the same quarter last year, the company recorded an impairment charge for supply chain technology and related assets.
After three years in a row with sales that were either at or below pre-pandemic levels, Nordstrom is looking for growth. When consumers had more money and fewer options for how to spend it during the pandemic, the upscale department store lost out on the significant sales gains that other retailers saw during the Covid pandemic.
The retailer has expanded the opening of Nordstrom Rack, one of its outlet stores, and redesigned the inventory to highlight top-selling brands as part of this initiative.
But, in a market where consumers are prioritizing experiences over material possessions like concert tickets and aren’t purchasing as many luxuries as they once did, like clothes, Nordstrom’s efforts have been more difficult.
A number of other retailers have also noted slower sales and expressed caution regarding the upcoming holiday season. Tuesday’s stock market decline was caused by poor retail earnings. Best Buy and Lowe’s reduced their sales projections for the fiscal fourth quarter, and investors were also let down by Abercrombie & Fitch and American Eagle Outfitters regarding their holiday sales outlooks.
Additionally, Nordstrom’s quarterly results showed that. From $3.55 billion in the same period last year to $3.32 billion now, the company’s total revenue decreased. Net sales fell 1.8% at Nordstrom Rack, the retailer’s off-price banner, and 9.4% at its namesake banner.
During an earnings call, CEO Erik Nordstrom stated that although the company’s average order size is increasing, customer traffic has been sluggish. According to him, the company has expanded free two-day delivery to more markets and offered additional rewards on beauty purchases in an effort to drive traffic to its stores and website.
When the company moved its anniversary sale into the third quarter of its fiscal year, it helped offset the loss of store fulfillment for Nordstrom Rack digital orders, which caused an 11.3% decline in digital sales.
Approximately one-third of Nordstrom’s total sales during the quarter came from online sales.
Nonetheless, Nordstrom emphasized its advancements and some encouraging trends during the investor earnings call.
Chief Brand Officer Pete Nordstrom stated that year-over-year trends for the majority of the retailers’ categories were stronger in the third quarter than they were in the second. According to him, beauty remains Nordstrom’s “top trip driver,” but sales of accessories and sportswear-related goods were also robust as customers flocked to purchase new shoes from companies like Hoka and New Balance.
The company’s inventory was down nearly 9% from the same period in 2022, and markdowns were less during the three-month period than they were a year earlier.
Even though they continued to report a drop in sales, Nordstrom Rack saw improvement during the quarter. According to CEO Erik Nordstrom, the company opened 11 new Rack locations in the third quarter and one early in the fourth, for a total of 19 new locations this year.
Chief Financial Officer Cathy Smith stated during the call that Nordstrom is making progress toward its objectives of increasing sales, enhancing profitability, and controlling inflated costs. However, she also mentioned a convoluted economic context.
“We observe cautious consumer behavior and it is unclear how changes in inflation, increased interest rates, and the start of student loan repayments will impact discretionary consumer spending in the run-up to the holidays,” the spokesperson stated.
The stock of Nordstrom has decreased 8% so far this year as of Tuesday’s close. That was less successful than the S&P 500, which saw gains of roughly 18% over that time.
