Nordstrom shares tumble more than 20% as earnings fall short, hurt by higher labor costs, weak Nordstrom Rack sales

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  • Nordstrom reported earnings that fell short of analysts’ expectations as labor costs eaten into profits and sales and its Nordstrom Rack business struggled to return to pre-pandemic levels.
  • The department store operator reaffirmed its full-year revenue outlook, even raising forecasts from rivals Macy’s and Kohl’s.
  • The company said it is taking steps to improve Rack’s performance, including investing in brand building and improving inventory levels. It also said that it needs to adjust the pricing.

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Nordstrom reported earnings Tuesday that fell short of analysts’ expectations as labor costs eat into profits and sales and its Nordstrom Rack business struggled to return to pre-pandemic levels.

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The news sent its stalled tumbling over 20% in extended trading.

Department store chains have tried to take advantage of shoppers refreshing their wardrobes as people return to offices and social events. Sales surpassed Wall Street estimates in the third quarter, but the company only reiterated its revenue forecast for the year.

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The disappointing performance was in contrast to rivals Macy’s and Kohl’s, which raised estimates for the rest of the year last week. Both companies have been more successful in passing higher costs to buyers and managing inventory carefully.

Chief Executive Officer Eric Nordstrom said the company needed to move more quickly to capitalize on its strengths and grow its market share.

“We are focused on accelerating our transformation and improving results,” Eric Nordstrom said in a press release.

Here’s how Nordstrom fared for the three-month period ended October 30 compared to what analysts expected, using Refinitiv data:

  • Earnings per share: 39 cents versus 56 cents expected
  • Revenue: $3.64 billion versus $3.55 billion expected

Net income rose to $64 million, or 39 cents per share, from $53 million, or 34 cents per share, a year ago. According to the Refinitiv survey, analysts were looking for earnings per share of 56 cents.

Revenue, including credit card sales, rose to $3.64 billion from $3.09 billion a year ago, topping expectations of $3.55 billion. But that’s still slightly below Nordstrom’s reported $3.67 billion in the third quarter of 2019,

In Nordstrom’s namesake department store brand, revenue rose 11% from a year ago and climbed 3% on a two-year basis. More customers came to its stores, and shoppers spent more per purchase. Nordstrom cites home goods, activewear, designer brands and beauty as areas of strength.

At Nordstrom Rack, an off-price division that competes with TJ’s Max and Macy’s Backstage, sales were up 35% from 2020 but fell 8% from 2019.

The company said it is taking steps to improve the performance of the racks, including investing in increasing brand awareness, better managing inventory levels, and balancing prices to align them with buyers’ expectations. Can go

Digital sales grew 12% year over year, representing 40% of the business. Nordstrom noted that last year its annual anniversary sales, which take place primarily online but also in stores, were completely shifted to the third quarter, while this year it fell through just one week of the quarter. .

Nordstrom said its inventory levels rose 13% compared to the same period in 2019, as the department store operator moved some orders for goods to ease ongoing supply chain constraints.

It still expects annual revenue, including credit card sales, to grow more than 35% from last year. According to Refinitiv, analysts were looking for 36% growth.

As of Tuesday’s market close, Nordstrom’s stock is up less than 1% to date. Its market cap is around $5.1 billion.

Find Nordstrom’s full earnings press release Here,

This story is developing. Please check back for updates.

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