Nordstrom Isn’t Immune From Retail’s Bloodbath
So much for the idea that luxury stores are immune from retail’s doldrums.
Nordstrom (JWN), the upscale retailer that has consistently outperformed its peers in terms of sales growth, stunned Wall Street by when it reported on Thursday that same-store sales had fallen at both its full-service department stores and its Rack outlet chain in the three months ending Oct. 31. Shares fell 16% in after-hours trading.
The company blamed “softer sales trends that were generally consistent across channels and merchandise categories,” unnerving investors already anxious after downmarket rival Macy’s (JWN) disastrous quarterly report a day earlier. Macy’s blamed a lack of tourists, warm weather and a shift in consumption patterns for its sharper-than-expected sales decline last quarter.
Nordstrom, considered a best-in-class retailer for how well-run its stores are and how well it has integrated stores and e-commerce, said comparable sales fell 2.2% at its namesake stores and at Rack stores. The one saving grace, and the only way Nordstrom managed to report overall higher comparable sales was a big 11% jump in its e-commerce, the result of its aggressive investments in tech. Overall, Nordstrom’s comparable sales rose 0.9%, well below the 3.6% Wall Street was expecting, according to Consensus Metrix.
The slowdown in comparable sales at Rack is particularly worrisome given how aggressive Nordstrom’s plans are for the off-price chain of stores, which sells clear out merchandise at big discounts. Nordstrom now operates 194 Rack stores, up from 167 a year ago and plans to get to 300 at some point. But with a comparable sales decline suggests that Nordstrom is overbuilding the chain, or at least doing it too quickly. What’s more, the off-price space is getting busier, with Macy’s launching its Backstage outlet stores this autumn and T.J. Maxx parent TJX Cos (TJX) continuing to expand.
Nordstrom said its gross profit margin fell 1.63 percentage points to 33.9% of sales, in part because of higher mark downs at Rack stores.
The retailer lowered its comparable sales forecast for the year as a result of the poor quarter.
These are the kinds of results people expect from retailers that cater to middle-income shoppers, not emporia for the affluent.