Shares of Nordstrom, Inc. were sharply lower after the high-end retailer posted declines in both comparable store sales and net sales for the nine-week holiday period ended January 1 as the promotional environment and tight margins prompted the retailer to lower fiscal year guidance.
Net sales decreased 3.5 percent for the nine-week holiday period ended December 31, compared with the nine weeks ended January 1, 2022. For the Nordstrom banner, net sales decreased 1.7 percent, while net sales at the Nordstrom Rack banner decreased 7.6 percent.
“The holiday season was highly promotional, and sales were softer than pre-pandemic levels. While we continue to see greater resilience in our higher income cohorts, it is clear that consumers are being more selective with their spending given the broader macro environment,” said Erik Nordstrom, CEO of Nordstrom, Inc. “Still, our team executed well, and we enter 2023 in a stronger position as we prioritized starting the new fiscal year with clean inventory levels, even if this required more markdowns than planned.”
The retailer took additional markdowns in order to finish the year in a healthy and current inventory position. The company expects year-end inventory levels to be down by a double-digit percentage compared with last year, and roughly at 2019 levels.
“Having a healthier inventory level and mix positions us well to react quickly to changing consumer demand,” said Pete Nordstrom, president and chief brand officer of Nordstrom, Inc. “Given the continued uncertain environment, we remain focused on executing with flexibility and agility, including conservative buy plans and faster inventory turns. We continue to enhance our customer experience with our Closer to You strategy, which links our digital and physical assets. Additionally, we are further optimizing our supply chain to improve the customer experience and expense efficiency, and we expect these initiatives will continue to deliver significant benefits in 2023.”
Based on holiday results, Nordstrom has updated its fiscal 2022 outlook as follows:
Revenue growth, including retail sales and credit card revenues, at the low end of its previously issued outlook of 5 to 7 percent
Earnings before interest and taxes margin, as a percent of sales, of 2.8 to 3.1 percent, compared with its prior outlook of 4.1 to 4.4 percent, reflecting lower than expected gross margin as the Company took additional markdowns to finish the year in a healthy inventory position; SG&A expenses continue to reflect progress on the Company’s supply chain optimization initiatives and ongoing expense discipline.
Adjusted EBIT margin of 3.1 to 3.3 percent, compared with a prior outlook of 4.3 to 4.7 percent. Income tax rate is in line with its previously issued outlook of approximately 27 percent. Earnings per diluted share, excluding the impact of share repurchase activity, if any, of $1.33 to $1.53, compared with a prior forecast of $2.13 to $2.43.
Adjusted EPS, excluding the impact of share repurchase activity, if any, of $1.50 to $1.70, compared with its prior outlook of $2.30 to $2.601. Leverage ratio was slightly above 3.0 times by year-end, compared with its prior outlook of below 2.9 times.