Nordstrom shares dived after the company reported third-quarter results far below Wall Street and its own, expectations.
In what could be another sign of trouble for the apparel-retail industry, Nordstrom shares dived in after-hours trading Thursday when the company reported third-quarter results far below Wall Street expectations and cut its outlook for the year.
The Seattle retailer reported a profit of $81 million, with earnings per share of 42 cents, for the quarter ended Oct. 31.
Even after adjusting for the costs of selling its credit-card portfolio, the earnings per share figure of 57 cents fell far short of Wall Street analysts’ expectations of 72 cents. In the same quarter last year the company earned 73 cents a share.
The results also fell below the company’s own expectations, reflecting “softer sales trends that were generally consistent across channels and merchandise categories,” Nordstrom said in a statement.
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The company’s shares plummeted as much as 20 percent in after-hours trading, after closing at $63.50 Thursday.
The sales slowdown began in August and persisted throughout the quarter.
No particular merchandise category did especially poorly. Rather, it was an across-the-board decrease in sales, executives said.
“It’s just a traffic thing,” Jamie Nordstrom, president of stores, said in an earnings call with analysts. “We’ve got less people buying clothes this quarter than we expected. And there’s really nothing else to point to.”
The company said it responded quickly with higher markdowns to reduce inventory, which affected profits.
Third-quarter revenue of $3.33 billion was up from $3.14 billion a year ago, but also fell short of analysts’ expectations of $3.37 billion.
Nordstrom lowered its earnings outlook for the year to $3.40 to $3.50 per share, from the previous estimate of $3.70 to $3.80.
Comparable sales — meaning sales in stores open for at least one year — increased 0.9 percent from the year-ago period, falling below company expectations. Cosmetics and coats did particularly well among merchandise categories.
The company lowered its outlook for comparable sales for the year to 2.5 to 3 percent, from the previous estimate of 3.5 to 4.5 percent.
It also revised its sales-growth outlook to 7.5 to 8 percent, down from the previous guidance of 8.5 to 9.5 percent.
Canada, where Nordstrom opened stores in Calgary, Ottawa and Vancouver in the past year, is exceeding expectations and represents a $1 billion opportunity by 2020, company executives said.
Customers’ move toward more online shopping was reflected in Nordstrom’s third-quarter results, with net sales at full-line Nordstrom stores falling 1.9 percent and comparable sales falling 2.2 percent compared with the year-ago period. Net sales at Nordstrom.com, meanwhile, rose 11 percent.
Nordstrom Rack’s net sales rose 8.4 percent while comparable sales decreased 2.2 percent. Nordstromrack.com and HauteLook net sales, meanwhile, increased 39 percent, outperforming expectations.
Nordstrom’s results were another ominous sign for the apparel-retail industry, especially heading into the critical holiday season.
Macy’s, which on Wednesday had announced worse-than-expected third-quarter earnings, said it expected sales to fall from a year ago in the fourth quarter — including the holiday season, and cut its profit forecast for the year. That set off a slide in its own, as well as other retailers’ shares.
In a bright spot for the retail industry, however, Kohl’s beat Wall Street expectations in its third-quarter earnings announced Thursday.
Industry analysts have pointed to a shift in consumer spending habits, with more customers buying online as well as shifting their discretionary dollars from products to experiences such as trips, movies and restaurants.
“Ultimately, the customer is saying something regarding retail in our niche and we need to get after it,” Blake Nordstrom, co-president, said in the earnings conference call.
Heading into the holidays, Nordstrom has made adjustments, Jamie Nordstrom said.
“We’re clearly a little more conservative in our planning, given recent sales trends,” he said. But “we’re going into fourth quarter all guns blazing. … We’re optimistic that our customers will respond to what we’re going to put forth over the next couple of months.”