Nordstrom says shoppers are still cautious, but sees fewer discounts this year

By Bill Peters

Shares fall as sales forecasts spook investors. 'We continue to see a cautious consumer that is mindful of discretionary purchases,' CFO says.

Shares of Nordstrom Inc. fell after hours on Tuesday after the department-store chain's full-year sales forecasts spooked investors, as inflation-fatigued customers continue to have reservations about buying new clothes.

However, the company said it expected its retail-industry peers to back off the discounting that has defined clothes-shopping for the past two years.

That forecast came as Nordstrom (JWN) laid out plans for this year to drive growth at its banner locations and its off-price Rack stores. It also wants to find new ways to reach customers online and speed up deliveries on e-commerce orders.

"We continue to see a cautious consumer that is mindful of discretionary purchases in light of inflation, higher interest rates and the resumption of student-loan payments," Chief Financial Officer Cathy Smith said during Nordstrom's earnings call on Tuesday.

However, Chief Executive Erik Nordstrom signaled that the steeper clothing bargains of the past two years were unlikely to spill over into this one.

"We really are not seeing an elevated promotional environment," he said. "We didn't see it through Q4, we're not seeing it now. So as best we can tell, we don't anticipate an unusually elevated promotional environment."

For the year ahead, the company said it expected full-year same-store sales within a range of a 1% decline to a 2% gain. The midpoint is below FactSet forecasts for a 1.4% gain. Nordstrom said it expected overall revenue trends for the year to land somewhere between a 2% decline and a 1% gain.

Shares fell 9.4% after hours on Tuesday.

Executives said they would open 22 new Rack stores this year and launch a new digital marketplace on its website that would widen its clothing offerings. They also said they would try to make online browsing and shopping more "personalized," and work on customer retention and "serving customers on more occasions."

For its fourth quarter, which included the holiday shopping season, Nordstrom's results beat expectations, helped by demand for shoes by On Running and Hoka, and fragrances from Burberry and Marc Jacobs.

The company reported fourth-quarter net income of $134 million, or 82 cents a share. Excluding a "a supply-chain asset impairment and related charge," Nordstrom earned 96 cents a share. Sales were $4.42 billion, up from $4.32 billion in the same quarter that ended last year.

Analysts polled by FactSet expected adjusted earnings per share of 88 cents, on revenue of $4.38 billion.

Net sales at Nordstrom Rack stores jumped 14.6%, as shoppers hunted for discounts. Meanwhile, net sales at its banner stores were down 3%.

David Silverman, senior director at Fitch Ratings, said in an email that the results overall reflected subdued demand for clothing, as consumers juggle more important expenses.

"Nordstrom's flattish revenue guidance for 2024 is likely a reflection of the still-volatile environment for discretionary-goods spending, particularly in apparel," he said.

-Bill Peters

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-05-24 2008ET

Copyright (c) 2024 Dow Jones & Company, Inc.