Nordstrom delivers solid quarter but slashes forecast as demand softens
Nordstrom lowered its full-year forecast amid slowing consumer demand even as it reported a solid second-quarter with sales increases across its banners.
The upscale department store retailer echoed a similar note to Macy’s, which also lowered its full-year forecast, saying customer traffic and demand decelerated significantly starting in late June (predominantly at Nordstrom Rack).
“We are adjusting our plans and taking action to navigate this dynamic in the short term, including aligning inventory and expenses to recent trends, and we remain confident in our ability to deliver on our long-term strategic and financial goals,” said CEO Erik Nordstrom.
Nordstrom earned $126 million, or $0.77 per share share, in the quarter ended July 30, compared with earnings of $80 million, or $0.49 per share, in the year-ago period. Adjusted for one-time items, including costs with winding down its Trunk Club division, the retailer earned $0.81 a share. Analysts were looking for $0.80 per share.
Total revenue rose to $4.095 billion from $3.657 billion. (Net sales rose to $3.991 billion from $3.565 billion, ahead of estimates.) Digital sales increased 6.3%, and accounted for 38% of total revenue.
“We delivered solid results in the second quarter, with topline growth, increased profitability and continued progress in our strategic initiatives," said Eric Nordstrom.
Nordstrom said men's apparel had the strongest growth in the second quarter versus 2021, and shoes, women's apparel and beauty also had double-digit growth. Total anniversary event sales increased 5%, including one day of the event that fell in the third quarter.
By division, net sales for the Nordstrom banner rose 14.7%, fueled in part by the retailer’s annual anniversary sale. Net sales at the off-price Nordstrom Rack were up 6.3% compared to the prior year quarter, but were down compared with pre-pandemic levels.
Nordstrom Rack has been struggling to return to pre-pandemic momentum. On an earnings call, Nordstrom executives said the company plans to reset the merchandise to include more of the premium brands that are currently in demand. In April, the company streamlined the leadership ranks of off-price division.
[Read More: Leadership changes at Nordstrom Rack as two long-time execs step down]
Across the company, inventory levels increased nearly 10% during the second quarter compared with the year-ago period
"As we look to the second half of the year, we are aggressively right-sizing our inventory while investing in supply chain and merchandising capabilities that will benefit us in 2023 and beyond,” said Pete Nordstrom, president and chief brand officer.
For the full year, Nordstrom now expects net revenue to increase 5% to 7%, compared with its previous expectations of 6% to 8%. It expects adjusted earnings per share of $2.30 to $2.60, down from an earlier forecast of adjusted earnings per share between $3.20 and $3.50.
Nordstrom had a total of 357 stores at the end of the second quarter.