Nordstrom earnings top expectations as retailer starts winding down Canada operations
Miami, Florida, Coral Gables Shops at Merrick Park, Nordstrom Department Store with shopper entering.
Jeff Greenberg | Universal Images Group | Getty Images
Nordstrom on Thursday reported lower sales and profits for the holiday quarter, although earnings topped Wall Street’s expectations.
The company said it expects sales to decline in the new fiscal year, reflecting in part its decision to wind down its Canadian operations.
“We entered Canada in 2014 with a plan to build and sustain a long-term business there. Despite our best efforts, we do not see a realistic path to profitability for the Canadian business,” CEO Erik Nordstrom said in a release Thursday.
Here’s what the department store reported for the fiscal fourth-quarter compared with what analysts were anticipating, based on Refinitiv estimates:
- Earnings per share: 74 cents vs. 66 cents expected
- Revenue: $4.32 billion vs. $4.34 billion expected
Nordstrom has struggled with slower sales, more markdowns and scrutiny from a prominent activist investor. Its net income in the period ended Jan. 28 fell to $119 million, or 74 cents per share, from $200 million, or $1.23 per share, a year earlier.
For the new fiscal year, Nordstrom expects revenue to fall 4% to 6%. It also projected EPS of 20 cents to 80 cents for the year.
Michael Maher, interim chief financial officer, said Nordstrom factored a more challenging economic backdrop and higher costs into its year-ahead forecast.
“We expect that elevated inflation and rising interest rates will continue to weigh on consumer spending, especially in the first half of the year,” he said on a call with investors. “We also anticipate continuing inflationary pressure on our expenses especially labor and transportation costs.”
He said the outlook included an approximately 2.5-percentage-point negative impact from the wind-down of its operations in Canada, a business that drove about $400 million in sales in the fiscal 2022 year.
As of Jan. 28, the company said it had six Nordstrom stores and seven Nordstrom Rack stores in Canada. Nordstrom said it ceased its Canadian e-commerce platform Thursday. It expects to finish Canadian store closures in Canada by late June.
Even before Nordstrom reported earnings, it cut its forecast and told investors that it had a rough holiday. In January, the department store chain said its net sales dropped 3.5% for the nine-week period that ended Dec. 31 compared with the year-ago period. Its net sales declined sharply during that stretch at its off-price banner, Nordstrom Rack.
One of the reasons for disappointing sales? More markdowns. Nordstrom said it discounted merchandise more than expected in November and December, so it could start the fiscal year with a healthier level of inventory.
The company drew attention and saw its stock soar in February, as activist investor Ryan Cohen bought a large stake in the company. Cohen, the chairman of GameStop and founder of Chewy, is interested in using that position to push for change — including getting former Bed Bath & Beyond CEO Mark Tritton off of Nordstrom’s board.
Cohen bought, and later sold, a major stake in Bed Bath, after criticizing Tritton’s strategy and pushing for change at that company, too.
As of Thursday’s close, Nordstrom shares are up more than 19% this year.
Read the full Nordstrom earnings release.