Shoppers exit a Nordstrom at Westfield Topanga Mall in Los Angeles on August 14, 2023.
Christina House | Los Angeles Times | Getty Images
Nordstrom Holiday quarter sales beat Wall Street expectations on Tuesday, but the retailer gave a muted forecast for next year, and shares fell about 10% in extended trading.
The Seattle-based company said it plans to open new Nordstrom Rack stores and increase online and in-store sales in the next year. However, it said full-year revenue, including retail and credit card sales, would range from a 2% decline to a 1% increase compared to the previous year. This forecast includes an increase of more than 1% due to one fewer week in the fiscal year.
Nordstrom said it expects earnings per share to range between $1.65 and $2.05 for the full year. That would be higher than its last fiscal year, which saw earnings per share of $1.51, the retailer said Tuesday.
Here's what the department store operator reported compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG, formerly known as Refinitiv:
Earnings per share: 96 cents adjusted vs. 88 cents expected Revenue: $4.42 billion vs. $4.39 billion expected
Similar to other retailers, Nordstrom has felt pressure from consumers who have become more selective and more price-conscious while dealing with inflation and rising interest rates. It has also suffered from company-specific problems, such as lagging sales at discount retailer Nordstrom Rack, and a lot of misplaced inventory, which has led to higher levels of markdowns.
In the fiscal quarter ended February 3, Nordstrom's quarterly revenue rose about 2% from $4.32 billion in the same period last year. It attributed nearly $190 million of those sales to having an extra week in the fiscal year.
Nordstrom's net income rose to $134 million, or 82 cents per share, from $119 million, or 74 cents per share, a year ago. Excluding charges associated with relocating the company's fulfillment center, as well as other adjustments, earnings per share were 96 cents.
Net sales of the company's namesake banner fell 3% in the fourth quarter compared to the same period last year. This includes a 4.1% increase for the additional week of the fiscal year.
The company's termination of its Canadian business reduced sales, resulting in a decline in net sales of more than 3%. The company announced a year ago that it would close its stores and online operations in Canada.
Shelf results
Nordstrom Rack, the company's discount brand, was the strongest performer in the holiday quarter. Its net sales rose 14.6%, including a 5.8% increase over the additional week of the year.
In the fourth quarter, more shoppers visited Nordstrom Rack's website and made purchases when they did, CEO Eric Nordstrom said on the company's earnings call.
The off-price chain has grown, even when getting support from opening new stores, with comparable banner sales rising to high single digits, he said.
Nordstrom opened 19 new Nordstrom Rack stores during the fiscal year, for a total of 258 stores. Including its 93 flagship Nordstrom locations, the company finished the year with a total of 359 stores, just one more than it had at the end of the same period last year.
The retailer plans to open 22 new Nordstrom Rack stores in 2024.
On the earnings call, Eric Nordstrom said the chain is “a growth engine for our company” and “Nordstrom's largest source of new customer acquisition.”
About a quarter of Rack's retained customers migrate to the Nordstrom banner within four years, he said.
The company did not announce plans to open new stores under its main banner, but Eric Nordstrom said that these stores are a major part of the company's business.
“Some of our fastest-growing stores last year were our larger urban department stores,” he said. “In particular, New York has shown real strong growth.”
Shopping trends
The women's apparel, beauty and active category had the strongest year-over-year growth in the fourth quarter. Some popular purchases included sneakers from On Running and Hoka, and clothing from Vuori, Eric Nordstrom said. Shoppers also purchased perfumes and clothing from leading fashion brands such as Vince and Cinq a Sept over the holidays, he said.
Online sales fell 1.7% in the fourth quarter compared to the same period last year. E-commerce represented 38% of total sales during the quarter, down from 40% in the same period the previous year, and 36% for the fiscal year, down from 38% in fiscal year 2022.
Eric Nordstrom said on the earnings call that store traffic is “still on the weak side” even though traffic at Nordstrom stores has improved sequentially over the year. Website traffic also remains weak, he said. However, he said the average order value is rising both online and in stores.
Inventory at the end of the quarter was down 2.7% compared to the same period last year. The company entered the holiday quarter with less inventory as well, leading to lower markdowns and less fresh merchandise, Eric Nordstrom said.
Next year, he said, the retailer will focus on driving sales growth at its namesake banner, operating more efficiently and building on momentum at Nordstrom Rack.
In April, it will launch an online marketplace on Nordstrom's website to expand its merchandise assortment with inventory owned and sold by third-party sellers. Marketplaces tend to be more profitable for retailers, since the company does not bear the risk of purchasing inventory that customers may not like and getting stuck marking it.
Nordstrom will also personalize the online experience for shoppers to direct them to items they might like, he said. He said that online and in-store cosmetics will play a prominent role in driving sales growth.
As of Tuesday's close, Nordstrom shares were up about 6% over the past year. This resulted in an underperformance of the S&P 500's gains by approximately 25%. Nordstrom stock closed Tuesday at $20.90, bringing the company's market value to about $3.4 billion.
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