Nordstrom Tumbles as Holiday Sales Miss Analysts' Estimates

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  • Department-store chain plans to cut expenses and investments
  • Company is working to adjust to increase in online sales

Nordstrom Inc., the largest U.S. luxury department-store chain, fell 6.7 percent after holiday results missed analysts’ estimates and the company gave a weak earnings forecast.

Excluding some items, earnings fell to $1.17 a share in the fourth quarter, the Seattle-based company said in a statement Thursday. Analysts had predicted $1.21 a share on average, according to data compiled by Bloomberg. Though sales rose 3.7 percent to $4.19 billion, that was below the $4.22 billion projection.

Slow mall traffic and a buildup in inventory forced department stores to rely more heavily on discounts in the holiday season. Nordstrom also is contending with a shift in consumer spending toward services and experiences, rather than clothing and other goods.

The shares fell to $49.17 at the close of trading in New York on Friday. Through Thursday’s close, Nordstrom had shown signs of rallying. It had climbed 5.8 percent this year after a 37 percent plunge in 2015.

Nordstrom said it expects earnings of $3.10 to $3.35 a share this year, excluding some items. Analysts estimated $3.55.

To address slower sales, Nordstrom is cutting expenses and investments. The company will reduce its capital spending by $300 million over the next five-years, Co-President Blake Nordstrom said on a conference call. This year, the company will spend $900 million on capital investments, with $300 million allocated to Canada and Manhattan, where the retailer is opening new stores.

Online Lessons

Nordstrom also is working to adjust to the unpredictable cost structure of its growing proportion of online sales. E-commerce accounts for more than 20 percent of sales, up from 8 percent five years ago, Chief Financial Officer Mike Koppel said on the call. The company has invested heavily in technology to gain market share, and coupled with the higher marketing and fulfillment costs of online transactions, expenses have outpaced sales, he said.

“We’re seeing what has been a very noticeable change in our business model,” Koppel said. “That is a model that behaves enormously different than the mall-based model, and so we have a lot to learn about that.”