Nordstrom falls after cutting its full-year earnings forecast

Bloomberg

Nordstrom Inc, which investors saw as insulated by its affluent customer base, sank after trimming its full-year outlook as the retailer’s Rack business slows amid lower demand and inventory buildup.
The department-store operator lowered its forecast for full-year sales to a range of 5% to 7%. That one-percentage-point cut comes just three months after Nordstrom had raised its outlook by a percentage point. Nordstrom also trimmed its forecast for earnings per share.
On a call with investors, executives said they observed a clear slowdown at the end of June, particularly among lower-income customers. Now, Nordstrom will move to aggressively clear out inventory — a profit-eroding measure that’s also been necessary at other retailers, from Macy’s Inc to Walmart Inc, as the industry wobbles following the pandemic’s shopping binge.
“The lower-income customer segments saw significantly more pullback versus higher income segments,” Chief Executive Officer Erik Nordstrom said during the call. He said customer traffic and demand began to decelerate in late June, mainly at the Rack business.
Nordstrom shares plunged 14% in pre-market trading in New York on Wednesday. The Rack chain continues to cause headaches for the company. At the end of last year, Nordstrom said that poor inventory planning at the off-price chain had dragged on revenue growth.
The results reinforce how budget-conscious shoppers are pulling back as inflation starts to pinch. Macy’s Inc cut its full-year forecast for profit and revenue on tighter consumer budgets and the likelihood of steeper markdowns to clear
inventory. Its upscale Bloomingdale’s and Bluemercury businesses did well, however.
Other high-end US consumer companies, such as Capri Holdings Ltd, Ralph Lauren Corp, Estee Lauder Cos and Tapestry Inc, have also trimmed forecasts or projected lower-than-expected growth in recent weeks. Much of that weakness, however, has been attributed
to China, which is seeing reduced demand amid strict anti-Covid measures, and a strong US dollar.
Nordstrom trimmed its earnings per share guidance to $2.45 to $2.75, compared to its previous view of $3.38 to $3.68. Total revenue in the second quarter was $4.1 billion, slightly higher than analysts’ estimates.