Nordstrom misses revenue estimates as inflation crimps shopping

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The Nordstrom store is pictured in Broomfield
by Ananya Mariam Rajesh

By Ananya Mariam Rajesh

(Reuters) – Nordstrom missed Wall Street targets for third-quarter revenue on Tuesday, in a sign that sticky inflation pressured consumer spending in the months leading up to the all-important holiday shopping season.

Shares of the upmarket department store chain fell nearly 2% in volatile after-market trading.

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

“The consumer is phasing out their shopping … they are shopping on a cheque to cheque,” Jane Hali & Associates senior analyst Jessica Ramirez said.

They are also “prioritizing categories of interest”, helping some perform better than others, she added.

Nordstrom’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 optimize inventory by bringing in trendier brands started to pay off.

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

“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, adding that Rack has been doing better over the last couple of quarters.

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

On an adjusted basis, Nordstrom earned 25 cents per share for the quarter ended Oct. 28, compared with estimates of 13 cents.

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.

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

(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Devika Syamnath)

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