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Nordstrom revenue sags as inflation turns holiday shoppers picky

Published November 21, 2023

By Ananya Mariam Rajesh 

Nordstrom (JWN.N) missed Wall Street targets for third-quarter revenue on Tuesday as sticky inflation pressured consumer spending in the months leading up to the all-important holiday shopping season.

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Shares of the upmarket department store chain fell nearly 1% in volatile after-market trading.

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Fellow retailers Best Buy and Kohl's have also hinted at a bleak holiday season with still-high interest rates, food prices and the start of student loan repayments prompting customers to spend less and push their shopping to the last minute.

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"The consumer is phasing out their shopping ... they are shopping cheque to cheque," Jane Hali & Associates senior analyst Jessica Ramirez said.

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Shoppers are also "prioritizing categories of interest", helping some segments perform better than others, she added.

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Nordstrom executives said in a post-earnings call that the active, beauty and accessories segments were leading sales growth.

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They also joined other retailers in highlighting cautious consumer spending.

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The company's eponymous label recorded a 9.4% drop in sales while discount banner Rack declined only 1.8%, its smallest fall in five quarters, as efforts to bring in trendier brands started to pay off.

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That, coupled with lower markdowns, helped the company post a 180-basis point increase in quarterly gross profit.

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"They did not do as much discounting as expected, but that may have hurt the top-line sales ... especially at Nordstrom," said Morningstar analyst David Swartz.

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Total revenue fell 6.4% to $3.32 billion, missing analysts' estimates of $3.40 billion, according to LSEG data.

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Excluding items, Nordstrom earned 25 cents per share, topping estimates of 13 cents.

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Best Buy and Kohl's had trimmed their annual sales expectations to account for difficult-to-predict consumer demand in an uncertain economy, but Nordstrom maintained its forecast.

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The company narrowed its annual adjusted profit forecast range, with the midpoint remaining the same.

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