Nordstrom says sales at its full-line stores are bucking the downward trend seen by most of the besieged brick-and-mortar retail sector. But quarterly profits disappointed Wall Street amid big investments and increased markdowns at Nordstrom Rack, its discount chain.
Sales at Nordstrom’s full-line stores are bucking the downward trend seen by most of the besieged brick-and-mortar retail sector, and it drew significantly more customers to both its online and physical stores in the latest quarter, the company said Thursday.
But quarterly profits disappointed Wall Street amid big investments and increased markdowns at Nordstrom Rack, its discount chain.
Shares of the Seattle-based retailer ended up 1.5 percent at $78.30 in after-hours trading, rebounding from a 2.5 percent dip that came shortly after the results were unveiled. Nordstrom posted a profit of $255 million, or $1.32 a share, for the quarter ended Jan. 31. That’s down from $268 million in the same quarter a year ago. Analysts expected $1.35 a share.
Unlike a lot of legacy brick-and-mortar retailers in an era where consumers are flocking to online shopping, Nordstrom has managed to post healthy growth. In the last quarter, sales at comparable stores grew 4.7 percent. In comparison, Macy’s has said it expects a 2.5 percent increase in comparable sales for the same quarter.
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Most of the company’s growth comes from its thriving online business and from discount stores, which now represent about 40 percent of Nordstrom’s business, versus some 30 percent three years ago.
But Nordstrom has pulled off what would seem to many ailing brick-and-mortar merchants a miracle: grow sales at its old-school, block-sized, full-line stores.
Comparable sales there grew half a percentage point, which analysts at Conlumino, a retail research firm, said was “the first positive growth” in that segment in at least two years. The analysts said the bump comes from initiatives such as pop-in stores and a successful Personal Stylist program.
Nordstrom’s plan is to sell $20 billion worth of goods by 2020, up from about $13 billion last year.
But that performance comes at a cost. It means big spending — in expanding the Nordstrom Rack discount chain, in information technology and online retail, and in new flagship stores, which serve as ambassadors of its brand.
Nordstrom says its capital investments will peak this year at $1.2 billion, up from $751 million in 2014.