Nordstrom (JWN) slumped lower Friday after the retailer slashed its full-year profit forecast following a weaker-than-expected holiday sales update.
Nordstrom said earnings for its fiscal 2022 year, which ends in February, would likely come in between $1.50 to $1.70 per share, well south of the $2.13 to $2.43 per share forecast it issued in late November, as holiday sales -- which were already heavily discounted -- fell to below prepandemic levels. Full year sales growth, meanwhile, is likely to come in at the lower end of its previous forecast of between 5% and 7%.
Sales for the nine weeks ending on December 31 were down 3.5% from last year, Nordstrom said, with a much larger 7.6% slump at its discount Nordstrom Rack division.
"The holiday season was highly promotional, and sales were softer than prepandemic levels. While we continue to see greater resilience in our higher income cohorts, it is clear that consumers are being more selective with their spending given the broader macro environment," said CEO Erik Nordstrom. "Still, our team executed well, and we enter 2023 in a stronger position as we prioritized starting the new fiscal year with clean inventory levels, even if this required more markdowns than planned."
Nordstrom shares were marked 1.2% lower in early Friday trading to change hands at $17.24 each, a move that would extend the stock's six-month decline to around 25%.
"Encouragingly, while promotions were deeper than expected during holiday, Nordstrom expects to end the year with inventory down double digits," said KeyBanc Capital Markets analyst Noah Zatzkin, who lowered his price target on the retailer to $22 a share, but kept an 'overweight' rating in place following last night's earnings update.
"Overall, we think more normalized inventory levels, a cleaner mix, and scaled-back buying plans should position the company well entering 2023," he added. "In particular, we think a cleaner inventory position at Rack should free the banner up to optimize brand mix more rapidly given excess inventory (opportunity) across the industry."
Earlier this week, the Commerce Department said U.S. retail sales fell sharply last month, with a pullback in gas prices clipping the overall total but failing to provide a boost to discretionary spending amid elevated inflation and an uncertain job market.
December retail sales fell 1.1% to a collective $677.1 billion, the Commerce Department said, well shy of the Street consensus forecast of a 0.8% decline. The figure is not adjusted for inflation, and includes overall sales of gasoline and other goods that have sharply declined in prices.
The closely tracked control group number, which excludes autos, building materials, office suppliers, gas station sales and tobacco, fell 1.1%, notably weaker than analysts' estimates.
