Nordstrom's Sales Slump Show It Can’t Sidestep Retail Gloom

Updated on
  • Hurricanes reduced profitability during the latest quarter
  • Retailer may face tougher path to securing buyout financing
Gadfly’s Sarah Halzack discusses Nordstrom posting a worse-than-expected sales decline ahead of the holiday season.

Nordstrom Inc. posted a worse-than-expected sales decline ahead of the holiday season, disappointing investors who’d hoped the upscale department-store chain was bucking the mall malaise.

Comparable sales turned negative, showing the previous quarter’s gain may have been fleeting rather than part of a sustained turnaround. The hurricanes that hit Florida and Texas also trimmed profit during the quarter ending on Oct. 28, the company said.

Nordstrom’s results are the latest blow for the beleaguered department-store industry, and they may make the company’s quest to secure financing for a buyout more difficult. Investors punished the company’s shares when it announced it was suspending efforts to take the company private. The Nordstrom family put the plan on hold because lenders’ terms proved too demanding.

Poonam Goyal, an analyst at Bloomberg Intelligence, said department-store results will be “unpredictable and volatile” in coming months as they implement new strategies for their physical stores, inventories and websites.

Department stores are heading into a crucial period as they scramble to adapt to the rapid growth of e-commerce and trends that seem to change on a dime, playing to the strengths of online retailers and fast-fashion chains that keep inventories tight. Nordstrom is responding by expanding its off-price chain Rack and adding more exclusive brands targeting younger shoppers.

Comparable sales, a key metric, fell 0.9 percent in the quarter, deeper than analysts’ estimate of a 0.4 percent decline. The company also reduced its guidance for profit during fiscal 2017 to a maximum of $2.95 a share, down from the previous top level of $3 a share.

Shares of Nordstrom fell as much as 7.6 percent to $37 in late trading after the results were released. The stock had fallen 16 percent this year through Thursday’s close.

Nordstrom reported earnings of 67 cents a share in the third quarter. Analysts had predicted 63 cents on average.

Status Update

This week provides a broad gauge of department-store health, with several of the biggest chains reporting their quarterly results. Macy’s Inc. saw its shares rise the most in more than a year as it kept margins steady and predicted a strong holiday performance. J.C. Penney Co., meanwhile, weighs in on Friday morning.

In June, the Nordstrom family said it was considering a buyout to give the business a chance to improve out of the glare of public markets. Those plans were put on hold for the rest of 2017 after banks’ financing offers were deemed too expensive.

The retailer plans to hire 13,650 seasonal workers to meet demand in the holiday selling season, the company said in October. Nordstrom’s hiring goal this year is 20 percent higher than 2016’s. In addition to staff at its namesake and Rack stores, Nordstrom is looking for workers at fulfillment and distribution centers to support e-commerce operations.

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