Nordstrom, the popular department store operator, recently reported its holiday-quarter sales which surpassed Wall Street’s expectations. However, the company provided a cautious outlook for the year ahead, leading to a decline in its stock price by 10%. Nordstrom plans to open new Nordstrom Rack stores and focus on increasing online and in-store sales in the coming year. Despite these efforts, the company expects a decline of 2% to a gain of 1% in full-year revenue compared to the previous year.
One factor contributing to Nordstrom’s subdued forecast is the impact of having one fewer week in the fiscal year, which is expected to result in over a 1% decrease in revenue. Additionally, like other retailers, Nordstrom has been grappling with challenges including consumers becoming more selective and price-conscious, as well as inflation and higher interest rates. The company has also faced internal hurdles such as lagging sales at Nordstrom Rack and inventory mismanagement, resulting in increased markdowns.
In the fiscal quarter that ended on February 3rd, Nordstrom reported a 2% increase in quarterly revenue compared to the same period the previous year. The additional week in the fiscal year contributed approximately $190 million to these sales. Nordstrom’s net income also saw a rise to $134 million from $119 million, excluding certain charges and adjustments.
Net sales for Nordstrom’s namesake brand experienced a 3% decline in the fourth quarter compared to the year-ago period. This includes a 4.1% boost from the extra week in the fiscal year. The company’s decision to wind down its Canadian operations also impacted sales negatively. However, Nordstrom Rack, the company’s off-price brand, performed well during the holiday quarter with a 14.6% increase in net sales.
In terms of product categories, women’s apparel, beauty, and the active category exhibited the strongest growth year over year. On the other hand, online sales dropped by 1.7% in the fourth quarter compared to the previous year. E-commerce accounted for 38% of total sales during the quarter, a slight decrease from the previous year.
Despite these challenges, Nordstrom’s stock has shown modest growth of approximately 6% over the past year. However, this performance falls significantly short of the S&P 500 index, which has gained around 25% during the same period. Nordstrom’s stock closed at $20.90 on Tuesday, giving the company a market value of approximately $3.4 billion.
In conclusion, Nordstrom’s recent report of holiday-quarter sales surpassing expectations was overshadowed by its cautious outlook for the year ahead. The company faces challenges from changing consumer preferences, inflation, and internal issues such as lagging sales at Nordstrom Rack and inventory mismanagement. As Nordstrom aims to open new stores and drive online and in-store sales, investors will closely monitor its performance and ability to overcome these obstacles.
