After heavy discounts failed to entice shoppers to its off-price Rack stores, Nordstrom Inc. lowered its annual profit forecast. This caused weak holiday sales and sent the company’s shares down 6% in after-hours trading on Thursday.
The company stated that it now anticipated annual revenue growth of between 5% and 7%, which was below its previous estimate. From the nine weeks ending January 1, 2022, Nordstrom Rack’s net sales decreased by 7.6% in the nine weeks leading up to December 31.
Due to decades of high inflation, Americans have cut back on discretionary spending, which has hurt U.S. retailers.
They have also been under pressure from steep discounts to get rid of overstocked inventory.
Macy’s Inc., a rival department store, lowered its holiday sales forecast earlier this month, blaming a longer-lasting than anticipated shopping lull between major holidays like Black Friday and Christmas. Lululemon Athletica Inc., a clothing retailer, warned of a squeeze on margins for the quarter.
According to data released on Wednesday by the National Retail Federation, consumers also pushed back purchases until as early as October, when retailers were offering higher discounts. This resulted in holiday sales that were lower than anticipated.
However, Nordstrom is performing worse than its rivals.
As a result of supply-chain issues caused by the pandemic, when there was a severe shortage of women’s clothing and shoes, it has had to offer more markdowns than anticipated, and its Rack banner continues to struggle with inventory mismanagement and merchandising issues.
Analyst Dylan Carden of William Blair stated, “They have had chronic merchandising missteps and just cannot seem to get any form of consistency at Rack.”
Instead of anticipating adjusted earnings per share of $2.30 to $2.60 for fiscal 2022, Nordstrom now anticipates $1.50 to $1.70.
Still, analysts said that this year could give Nordstrom and other retailers some hope due to lower inflation, higher inventory levels, and normalized freight and labor costs.
Morningstar analyst David Swartz stated, “Going into 2023, it gives me some confidence that even if the first half is kind of weak, maybe it will start to look better in the second-half of the year.”
By Sophia Deborah; Sriraj Kalluvila and Devika Syamnath handled editing
According to data released on Wednesday by the National Retail Federation (NRF), US holiday sales fell short of estimates by 5.3%. This was because consumers who were bearing the brunt of stubbornly high inflation pushed back purchases until October, when retailers offered substantial discounts.
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