Nordstrom Inc. boosted its outlook for annual profit this year, saying a reduction of merchandise and the winding down of its Canada operations will improve performance.
(Bloomberg) — Nordstrom Inc. boosted its outlook for annual profit this year, saying a reduction of merchandise and the winding down of its Canada operations will improve performance.
The department-store company said in a statement that it’s expecting adjusted earnings this fiscal year of $1.80 to $2.20 per share — up from the previous range, released in January, of as much as $1.70. Analysts’ average estimate was $1.93.
The moves to shutter the Canadian business and reduce inventory “will enable us to simplify our operations and further increase our focus on driving long-term profitable growth in our core US business,” Chief Executive Officer Erik Nordstrom said.
The shares were down less than 1% at 6:10 p.m. in extended trading in New York, erasing an earlier gain. Nordstrom stock has risen 20% in 2023 through Thursday’s close.
Nordstrom opened its Canadian operations in 2014 and has six namesake stores and seven off-price Rack locations, while employing around 2,500 in the country. The Canadian e-commerce platform is ceasing operations, and stores are expected to be closed by late June. Overall the country accounts for less than 3% of the company’s sales.
“Despite our best efforts, we do not see a realistic path to profitability for the Canadian business,” Nordstrom’s CEO said.
While discount rivals such as TJX Companies Inc.’s T.J. Maxx and Ross Stores Inc. have attracted more shoppers as inflation bites, Nordstrom’s off-price Rack business has floundered. Sales remain below pre-pandemic levels, a sign that Rack’s market share has been shrinking at the expense of competitors.
Sales at Rack fell 8.1% in the quarter that ended on Jan. 28 versus a 2.4% drop at the Nordstrom banner stores. Still, executives told analysts on an earnings call that they plan to open 20 Rack stores starting in the spring since off-price consumers tend to prefer in-store shopping. Rack locations are less expensive to build than a full-fledged department store, executives added.
Nordstrom expects overall sales to fall 4% to 6% this year from fiscal 2022 as it winds down the Canadian business and as consumers at all income brackets are spending less on discretionary items, executives said.
Sales at US department stores have been uneven in recent months, signaling a pullback by some shoppers amid stubbornly high inflation. Companies’ decisions to build up merchandise during the pandemic consumption boom have now left some store operators stuck with too much inventory, leading to profit-busting markdowns.
Earlier on Thursday, Macy’s Inc. said revenue growth at its higher-end Bloomingdale’s and Bluemercury brands was strong in the latest quarter, while sales at its mass-market Macy’s namesake brand fell 3.3% year-over-year. Last month, Capri Holdings Ltd. forecast weaker-than-expected growth because of particularly weak sales of its Michael Kors brand at department stores. Department store sales of Ralph Lauren Corp. products also fell in the most recent quarter, albeit by less than at Capri.
(Updates with details on Rack business starting in fifth paragraph.)
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