Nordstrom (JWN) shares slumped lower Wednesday after the struggling retailer slashed its full-year profit forecast following a mixed set of second quarter earnings and softening consumer spending heading into the summer months.
Nordstrom, which targets a higher-income consumer base than many of its department store rivals, said full-year sales will likely rise between 5% and 7% from 2021 levels, down from its prior forecast of an 8% growth rate. Adjusted profits, Nordstrom said, will likely range between $2.45 to $2.75 per share, well off its May estimate of between $3.38 and $3.68 per share, as it takes a likely $200 million hit from deeper markdowns to move its clearance inventory.
For the three months ending in July, Nordstrom said sales rose 12% to $4.095 billion, just ahead of Street forecasts, with adjusted earnings of 81 cents per share, topping analysts' estimates by a penny.
"While our quarterly results were consistent with our previous outlook, customer traffic and demand decelerated significantly beginning in late June," said CEO Erik Nordstrom. "We are adjusting our plans and taking action to navigate this dynamic in the short term."
Nordstrom shares were marked 17.6% lower in early Wednesday trading to change hands at $19.11 each.
Earlier this week, department store rival Macy's (M) also trimmed its full-year profit forecast, despite better-than-expected second quarter earnings amid what it sees as the extended impact of inflation on domestic discretionary spending.
"While we continue to think the higher income profile of Nordstrom's average customer positions the company well in the current environment, clearly it's not immune to the difficult macro backdropm," said KeyBanc Capital Markets analyst Noah Zatzkin, who carries an 'overweight' rating with a $30 price target on the stock.
"Softness that began exiting June was principally driven by lower income segments of Rack customers," he added. "We remain confident in management's ability to improve trends at Rack as the Company continues to optimize brand mix, and believe Nordstrom possesses strong long-term margin opportunity via supply chain initiatives."
