Shares of Nordstrom fell 10% before the bell after the retailer’s annual results were considerably below Wall Street estimates on Tuesday, indicating a slower-than-expected recovery in demand even as consumers feel some relief from lessening inflationary pressures.

Along with Macy’s, the business is indicating dismal sales for 2024 as retailers prepare for more pressure on spending on non-essential products like clothing and home furnishings.

“We continue to see a cautious consumer that is mindful of discretionary purchases in light of inflation, higher interest rates,” Nordstrom CFO Cathy Smith said.

The company projects 2024 revenue to be between 2% and 1% higher than LSEG’s projections of a 0.04% increase.

Analysts had predicted $1.98, but Nordstrom predicted an annual profit per share in the range of $1.65 to $2.05. The business anticipates first-quarter earnings that range from a modest loss to about break-even.

“The outlook is disappointing … Nordstrom really just hasn’t recovered that well from the pandemic,” Morningstar analyst David Swartz said.

Nordstrom’s $4.42 billion fourth-quarter total revenue exceeded forecasts of $4.39 billion, mostly due to high demand for beauty and running shoe sales during the Christmas season.
With things removed, the company’s earnings per share were 96 cents, exceeding projections of 88 cents due to decreased markdowns and easier supplier costs.

Revenue at Nordstrom’s own label fell by 3%, but sales at the discount banner Rack increased by 14.6%.

“They are not opening any new full-line stores certainly. So it is clear they have got problems there because the competition is just hurting them a lot more than it used to,” Swartz added.

But in an effort to draw in lower-class customers, Nordstrom has been attempting to introduce trendier merchandise to its Rack locations, and it plans to add 26 new locations this year and in the spring of 2025.

“We’re going to grow where the market is growing … we’re going to grow with Rack and the off-price channel,” Nordstrom CFO Smith said.

Conversely, Peer Macy’s recently declared that it would concentrate on its premium brands, Bloomingdale’s and Bluemercury, which typically draw in higher-earning clientele.

According to CEO Tony Spring’s February announcement, Macy’s plans to open 15 new Bloomingdale’s and 30 new Bluemercury stores during the next three years.

(Adapted from Reuters.com)