Nordstrom said shoppers remain cautious, but there are fewer discounts this year.
Shares of Nordstrom Inc. fell hours after the department store chain’s annual sales forecast surprised investors. That’s because inflation-weary customers are continuing to book new clothes.
But the company said it expects its retail industry peers to roll back the discounts that have defined clothing shopping for the past two years.
That prediction came with Nordstrom JWN.
We’ve put together a plan this year to drive growth in our banner locations and discount rack stores. We also want to find new ways to reach customers online and increase delivery speeds for e-commerce orders.
“We continue to see cautious consumers mindful of discretionary purchases in light of inflation, higher interest rates and the resumption of student loan payments,” Chief Financial Officer Cathy Smith said during Nordstrom’s earnings call Tuesday.
But Chief Executive Officer Erik Nordstrom signaled that the steep clothing discounts of the past two years were unlikely to affect the event.
“We’re not really seeing the promotional environment improving,” he said. “We didn’t see it until the fourth quarter and we don’t see it now. So as far as we can tell, we don’t expect the promotional environment to be unusually high.”
The company said it expects annual same-store sales to range from a 1% decline to a 2% increase over the next year. The midpoint is below the FactSet forecast for a 1.4% rise. Nordstrom said it expects overall sales trends this year to range between a 2% decline and a 1% increase.
The stock was down 10.1% after business hours Tuesday.
Executives said the company will open 22 new Rack stores this year and launch a new digital marketplace that will expand its clothing offerings on its website. They said they would also work to further ‘personalize’ online browsing and shopping, as well as to retain customers and provide them with ‘more opportunities to serve them’.
During the fourth quarter, which included the holiday shopping season, Nordstrom’s performance beat expectations, driven by demand for footwear from On Running and Hoka and fragrances from Burberry and Marc Jacobs.
The company reported fourth-quarter net income of $134 million, or 82 cents per share. Excluding “supply chain asset impairment and related costs,” Nordstrom earned 96 cents per share. Sales were $4.42 billion, up from $4.32 billion in the same quarter ended last year.
Analysts surveyed by FactSet expected adjusted earnings per share of 88 cents and revenue of $4.38 billion.
Net sales at Nordstrom Rack stores increased 14.6% as shoppers sought discounts. Meanwhile, banner store net sales decreased 3%.
David Silverman, senior director at Fitch Ratings, said in an email that the results reflected an overall decline in demand for clothing as consumers spend more important money.
“Nordstrom’s 2024 sales guidance likely reflects the still volatile environment for discretionary spending, particularly in the apparel sector,” he said.
