Nordstrom, the American luxury department store chain, has raised the lower end of its annual sales forecast following a slight improvement in comparable sales, despite challenges in certain product categories. On Tuesday, the company adjusted its guidance, though it remains cautious due to an uncertain external environment. Shares of the retailer, which have surged by approximately 33 per cent this year, saw a slight dip of 1 per cent in after-hours trading.
Chief Financial Officer Cathy Smith commented that while the company was pleased with its year-to-date results, it continues to face an unpredictable market. “The external environment remains uncertain,” Smith stated in prepared remarks.
Inventory growth at the end of the third quarter exceeded sales growth, rising by 6 per cent, compared to a 5 per cent increase in sales. This disparity was partly attributed to sluggish demand in seasonal categories such as boots, sweaters, and outerwear, especially in certain regions. Pete Nordstrom, the company’s President, mentioned that Nordstrom had curated a selection of sweaters and luxury fragrances in preparation for the holiday season, aiming to bolster sales.
The recent slowdown in sales trends observed towards the end of October has raised concerns among analysts, with Morningstar’s David Swartz suggesting that this could signal a less-than-optimistic outlook for the holiday season. However, despite the overall softness in some categories, the retailer exceeded analysts’ expectations for third-quarter revenue and profits. This was largely attributed to the success of popular brands such as On Running, Hoka, and Vuori, which helped maintain sales momentum.
Nordstrom’s strategy of adding in-demand brands, along with its focus on digital growth and expanding stores of its off-price brand, Rack, has proven effective in driving sales. This approach has given the company an edge over other department stores, such as Macy’s and Kohl’s, which have faced more inconsistent consumer demand in recent months.
For the remainder of the year, Nordstrom has updated its annual sales growth forecast to a range of 1 per cent to 2 per cent, up from its previous outlook of flat sales to a 2 per cent increase. This revision is an indication that the company is cautiously optimistic about its performance despite the current market uncertainty.
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In its third-quarter results, Nordstrom reported total revenue of $3.46 billion, surpassing analysts’ expectations of $3.35 billion, according to data from LSEG. The strong performance was driven by the success of full-price sales and improved variable costs, which contributed to a 60-basis point expansion in the company’s quarterly gross profit margin, bringing it to 35.6 per cent.
In terms of profitability, Nordstrom reported an adjusted profit of 33 cents per share, exceeding analysts’ expectations of 21 cents per share. This positive outcome further illustrates the retailer’s resilience in navigating a challenging retail environment.
Despite the uncertainty surrounding the holiday season, Nordstrom’s ability to attract shoppers through a strategic mix of in-demand products and a focus on enhancing its digital presence has positioned it well for the final quarter of the year. While challenges remain, particularly in some seasonal categories, the retailer’s diversified approach and strong brand partnerships appear to be providing a buffer against the more sluggish trends seen elsewhere in the industry.
Looking ahead, Nordstrom’s ability to maintain its performance through the remainder of the year will likely depend on how well it can navigate potential disruptions in the broader retail environment. As consumer spending continues to evolve amid economic uncertainty, the company will be closely monitoring market conditions to ensure it can adapt to shifting demand and maximise growth opportunities during the holiday period.
