Nordstrom’s Stock Drops 10% After Retailer Cautions About Possible Sales Declines in 2024

Nordstrom’s holiday-quarter sales surpassed Wall Street’s expectations on Tuesday, yet the retailer provided a subdued outlook for the upcoming year, resulting in shares dropping approximately 10% in after-hours trading.

The Seattle-based company disclosed plans to launch new Nordstrom Rack stores and boost online and in-store sales in the forthcoming year. However, it indicated that full-year revenue, encompassing retail sales and credit cards, is anticipated to range from a 2% decrease to a 1% increase compared to the previous year. This forecast includes a reduction of more than 1% due to one less week in the fiscal year.

Nordstrom projected earnings per share between $1.65 and $2.05 for the entire year, surpassing the earnings per share of $1.51 from the most recent fiscal year, as stated by the retailer on Tuesday.

Here’s how the department store operator’s performance compared to Wall Street’s expectations, based on a survey of analysts by LSEG, previously known as Refinitiv:

Earnings per share: Adjusted to 96 cents vs. the expected 88 cents
Revenue: $4.42 billion vs. the anticipated $4.39 billion

Similar to other retailers, Nordstrom has faced challenges stemming from consumers becoming more selective and price-conscious, alongside grappling with inflation and higher interest rates. Additionally, it has encountered company-specific issues such as sluggish sales at its off-price retailer, Nordstrom Rack, and inventory mismanagement, resulting in increased markdowns.

Women’s apparel, beauty, and active categories experience robust year-over-year growth.

In the fiscal quarter ending Feb. 3, Nordstrom observed a roughly 2% increase in quarterly revenue from $4.32 billion in the corresponding period of the prior year. It attributed approximately $190 million of these sales to the additional week in the fiscal year.

Nordstrom’s net income climbed to $134 million, or 82 cents per share, from $119 million, or 74 cents per share, compared to a year earlier. Excluding a charge related to relocating the company’s fulfillment center, along with other adjustments, earnings per share amounted to 96 cents.

Net sales for the company’s flagship banner declined by 3% in the fourth quarter compared to the same period in the previous year, including a 4.1% boost from the extra week in the fiscal year.

The company’s cessation of its Canadian operations impacted sales, leading to a decline of over 3% in net sales. Nordstrom had announced a year ago its decision to close its stores and online operations in Canada.

Here are the Rack results

Nordstrom Rack, the company’s off-price brand, emerged as the top performer in the holiday quarter. Its net sales surged by 14.6%, inclusive of a 5.8% uplift from the additional week in the year.

CEO Erik Nordstrom highlighted on the company’s earnings call that in the fourth quarter, more consumers visited Nordstrom Rack’s website and completed purchases compared to previous periods. He noted that even when excluding the impact of opening new stores, the off-price chain experienced growth, with comparable sales for the banner increasing by high single digits.

Online marketplace launch aims to expand inventory assortment, enhancing profitability.

During the fiscal year, Nordstrom unveiled 19 new Nordstrom Rack stores, bringing the total to 258 stores. Alongside its 93 flagship Nordstrom locations, the company concluded the year with a total of 359 stores, merely one more than it had after the year-ago period.

The retailer intends to launch 22 new Nordstrom Rack stores in 2024.

Erik Nordstrom emphasized on the earnings call that the chain serves as “a growth engine for our company” and represents Nordstrom’s “largest source of new customer acquisition.” He noted that approximately a quarter of retained Rack customers transitioned to the Nordstrom banner within four years.

While the company did not unveil plans to open new stores under its flagship banner, Erik Nordstrom underscored the significance of these stores within the company’s operations.

“Some of our fastest-growing stores this past year were our big urban flagship stores,” he remarked. “In particular, New York has shown real strong growth.”

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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