Nordstrom's Holiday-Quarter Sales Top Expectations Despite Muted Outlook: Stock Falls 10% After Report

Seattle-based retailer Nordstrom reported better-than-expected holiday-quarter sales, surpassing Wall Street's projections. However, the company's outlook for the upcoming year is more subdued.

Plans for the Year Ahead

Nordstrom announced its intention to enhance sales in the coming year by opening new Nordstrom Rack stores and boosting both online and in-store sales. The company forecasts a 2% decline to a 1% gain in full-year revenue, including retail sales and credit cards, compared to the previous year. This forecast accounts for a more than 1% impact due to having one less week in the fiscal year.

Earnings Expectations

The company expects earnings per share to be between $1.65 and $2.05 for the full year. This shows an increase from the previous fiscal year, which reported earnings per share of $1.51.

Financial Performance

Nordstrom's quarterly revenue for the fiscal quarter ending in February rose about 2% from the year-ago period. The company's net income also saw an increase, rising to $134 million, or 82 cents per share, from $119 million, or 74 cents per share, a year earlier.

Impact of Company-Specific Challenges

Just like other retailers, Nordstrom has been impacted by consumers' growing selectivity and price-conscious behavior, exacerbated by inflation and higher interest rates. The company has also faced internal challenges such as lagging sales at Nordstrom Rack and inventory issues leading to increased markdowns.

Store Performance

The report showed a 3% decline in net sales for the company's namesake banner in the fourth quarter compared to the year-ago period. However, Nordstrom Rack, the off-price brand, performed well with a 14.6% increase in net sales during the holiday quarter.

Expansion Plans

Nordstrom expanded its Nordstrom Rack stores by opening 19 new ones during the fiscal year, with a plan to open 22 more in 2024. The company highlighted the off-price chain as a significant growth engine and its primary source of new customer acquisition.

Online Sales and Future Initiatives

While online sales saw a 1.7% drop in the fourth quarter, representing 38% of total sales during the period, the company aims to revitalize its online platform. Nordstrom plans to launch an online marketplace on its website in April to diversify its merchandise assortment by incorporating inventory from third-party vendors. The company also aims to personalize the online shopping experience for its customers.

Stock Performance

Following the report, Nordstrom's stock fell approximately 10% in extended trading. As of the latest update, the company's stock closed at $20.90, resulting in a market value of about $3.4 billion.

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