The Seattle-based retailer also reported lower sales and downgraded its profit outlook for the rest of the year.

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Nordstrom’s sale racks are likely to fill out as the Seattle-based retailer tries to give bargain-hunters what they want.

Nordstrom said more discounting in stores was partly to blame for a 21 percent decline in its second-quarter profit, and it warned of lower-than-expected profits for the rest of the year due to continued price markdowns.

The competitive environment is highly promotional, and customers are more cautious today,” President Blake Nordstrom told analysts in a conference call Thursday.

For the period ended Aug. 2, Nordstrom made $143 million, or 65 cents a share, down from $180 million, or 71 cents a share, a year ago. Analysts on average had expected a per-share profit of 64 cents.

Wall Street seemed disappointed, sending shares down more than 60 cents in after-hours trading to about $29.60. The company announced its results after the stock markets closed. Earlier Thursday, shares ended up 53 cents at $30.22.

Like many retailers, Nordstrom is struggling as U.S. consumers pare back their spending on nonessentials amid rising unemployment, high gas prices and a troubled housing market. The company’s second-quarter sales dipped 4.3 percent from a year ago to $2.29 billion.

Nordstrom downgraded its profit outlook for the rest of the year but left its sales projection unchanged. Analysts saw that as a sign that the company plans to use profit-eroding markdowns to draw shoppers into its stores.

“Their competitors have been a little bit more promotional, so that’s forcing their hand a bit,” said Dan Geiman of McAdams Wright Ragen in Seattle.

“When they decide something is not selling, they’re probably going to mark the price down a little bit more, a little bit faster,” added Patricia Edwards, a money manager at Wentworth, Hauser and Violich in Seattle.

For the full year, Nordstrom now predicts its per-share profit to range from $2.55 to $2.65, down from its previous projection of $2.65 to $2.80.

The company said sales at stores open at least a year declined 6 percent in the second quarter. A bright spot was its off-price Nordstrom Rack division, which experienced a 6.3 percent increase in same-store sales. Nordstrom Direct, which includes the company’s Web site, also performed well, posting year-over-year sales growth of 14.6 percent.

Despite the difficult economy, Nordstrom said it remains on track to open three additional full-line stores in the third quarter, bringing its total to 108. What’s more, the company added to its expansion plans in the second quarter, announcing four new Rack stores for next year and a new full-line store in Santa Monica, Calif., for 2010.

California, where consumers have been especially hard-hit by plunging home values — and where Nordstrom has nearly a third of its business — remains tough, while the South, Northwest and Midwest are relatively strong, Chief Financial Officer Michael Koppel said.

Across merchandise categories, cosmetics, accessories and women’s shoes performed well, though women’s apparel disappointed, Koppel said.

The May-through-July quarter represents Nordstrom’s second-busiest period of the year, after the holiday-sales season, because it includes three of its five annual sale events.

Pete Nordstrom, president of merchandising, told analysts that “pre-selections” for the company’s anniversary sale exceeded expectations. A little more than a week before the event’s July 18 start date, customers who spent at least $2,000 in the past year could privately view discounted fall merchandise and place orders.

That those orders were better than expected “tells me that even the well-heeled are watching their pennies,” said Edwards, whose firm manages $14.8 billion in assets, including nearly 700,000 Nordstrom shares.

Nevertheless, Edwards said she was encouraged that Nordstrom cut its selling, general and administrative expenses 5 percent during the quarter. That, along with lower inventory levels, reflects favorably on management, she said.

“It’s dangerous waters, but I think they’re navigating pretty well.”

Amy Martinez: 206-464-2923 or