The Seattle retailer is taking a more cautious approach in opening new stores and remodeling old ones as shoppers pull back.
The economic downturn means some U.S. shopping developments no longer will deliver new Nordstrom stores as planned over the next two years.
Seattle-based Nordstrom said Thursday it will open seven to eight new full-line clothing stores in 2009 and 2010, down from the 12 originally planned. And it will adopt a more cautious approach to renovating stores, taking on only two major remodeling projects a year rather than the more typical five to six.
“We are in unprecedented times, and customers are lacking confidence today,” President Blake Nordstrom told analysts. “We saw this clearly in mid-September, when the financial markets became extremely stressed.”
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Nordstrom saw a 57 percent drop in third-quarter profit, citing lower sales and more price markdowns. For the three months ended Nov. 1, profit fell to $71 million, or 33 cents a share, from $166 million, or 68 cents a share, a year ago.
Excluding one-time items, Nordstrom would have had a per-share profit of 30 cents, slightly off from the 31 cents analysts, on average, expected. Wall Street reacted by pushing the stock down about 70 cents to less than $12.30 in after-hours trading.
Nordstrom released its results after the close of regular trading. Earlier Thursday, shares rose 34 cents, or 2.7 percent, to $12.96. A year ago, they traded in the mid-$30s.
“Unless you’re Wal-Mart, pretty much every retailer is suffering,” said Dan Geiman, who tracks Nordstrom for McAdams Wright Ragen in Seattle. “Really, there’s not a lot of encouraging news on the horizon, so I don’t know that you’ll see a huge improvement in operating trends anytime soon.”
Blake Nordstrom told analysts that customers are “shopping less and are making more deliberate purchases,” adding that “value is more important than it has been in a number of years.”
The company did not say how many of its 2009 and 2010 store openings will be delayed vs. canceled, though President of Stores Erik Nordstrom said, “It’s safe to assume … a portion of those will go away.” He declined to disclose the status of specific projects.
Nordstrom cut its five-year capital-expenditure plan to $2.5 billion from $3 billion last year. The company also said Thursday:
• It now expects a per-share profit between $1.87 and $1.97 for the full fiscal year ending Jan. 31, down from the $2.55 to $2.65 projected three months ago.
• It suspended its stock buyback program until the economy improves, yet not before repurchasing about 800,000 shares valued at $26 million during the quarter.
• It ended the quarter with inventory on a per-square-foot basis down 3 percent from a year ago.
• Notification went out in late October to Nordstrom credit-card holders that interest rates will go up 2 to 3 percent, effective Saturday.
• Total sales declined 8.4 percent to $1.81 billion, but sales for its direct segment, which includes its Web site, jumped 8.5 percent.
Nordstrom’s off-price Rack division also was a bright spot, with sales at stores open at least a year up 3.6 percent.
The company has announced plans for 12 new Rack stores nationwide since January, a threefold increase from 2007. Spokeswoman Brooke White said Rack store openings remain on track, despite the pullback in full-line store openings.
“The consumer is trading down,” said Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment-banking firm in New York. “If I were Nordstrom, I would open no new traditional stores, cancel all remodelings, conserve cash and grow Nordstrom Rack.”
To attract customers to its stores and Web site, the company said last month it would offer Nordstrom card holders twice the usual number of “rewards points” for purchases made through Dec. 31.
Thursday, Blake Nordstrom suggested it is getting better deals from its vendors, whom he described as “motivated to stimulate sales.”
“We are passing those savings onto customers,” he said.
Amy Martinez: 206-464-2923 or firstname.lastname@example.org