Nordstrom (JWN) shares slumped lower Wednesday after the retailer posted better-than-expected third quarter earnings but trimmed its profit outlook for its full financial year amid slower early-holiday spending and ongoing supply chain inflation.
Nordstrom, which targets a higher-income consumer base than many of its department store rivals, said adjusted profits will likely range between $2.13 and $2.43 per share for its full financial year, down from its prior forecast of between $2.45 to $2.75 per share, as it takes another hit from deeper markdowns as it clears out excess inventory and opens space for new premium brand purchasing capacity.
The group noted, however, that it still expects to see full-year revenue growth of between 5% and 7% and adjusted profit margins of between 4.3% and 4.7%.
For the three months ending in October, Nordstrom said sales fell 2.5% to $3.55 billion, just ahead of Street forecasts, with adjusted profits of 20 cents per share, down 48% from last year but ahead of analysts' estimates of 14 cents per share. Sales at Nordstrom Rack were down 1.8% from last year, while digital sales fell 16%, hit in part by the timing of Nordstrom's anniversary sale event, which loaded some sales into the second quarter.
"With regard to recent trends, sales softened in late October and early November but improved in the last two weeks," Nordstrom's chief accounting officer Michael Maher told investors on a conference call late Tuesday. "We believe that unseasonably warm temperatures in certain geographies contributed to the decelerating trends, along with delayed holiday shopping."
"As for holiday shopping expectations, we believe that this year's calendar, which has an extra Saturday between Thanksgiving and Christmas, will lead some customers to wait until closer to Christmas to make their purchases," he added. "We continue to expect an elevated promotional environment across retail in the fourth quarter.
Nordstrom shares were marked 7% lower in early Wednesday trading to change hands at $21.10 each, a move that would erase all of the stock's again for the past six months.
"Nordstrom posted top-and bottom-line beats and maintained its full-year guidance amid a difficult retail environment," said KeyBanc Capital Markets analyst Noah Zatzkin, who carries and 'overweight' rating with a $30 price target on the stock.
"Importantly, Nordstrom continues to make progress on its inventory, positioning it well for 4Q, and the Company expects to end the year with clean inventory, which we think will position Nordstrom well heading into FY23 relative to many peers," he added.
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