Shares of Nordstrom (JWN) are down 10% at a nine-year low in premarket trade after the company reported terrible first quarter results.
The high-end department store missed Wall Street's estimates across the board. Sales fell 3.5% (vs. flat estimates) with the full-price segment down 5.1% and off-price segment down 0.6%.
Management said that sales missed its estimates by several percent due to missteps in the full-price and off-price segments in store and online:
- The Nordy Club loyalty program roll out went all digital, but management learned that some customers were dependent on paper marketing, which reduced traffic.
- Digital marketing efforts also suffered as the company focused on its loyalty program.
- Management also said that its merchandise mix and assortment was off in both the full and off-price segments while the women's apparel and beauty categories were tough.
Encouragingly, inventory is in a good place and cost discipline was successful.
Still, operating profit (EBIT) fell 57% while gross margins fell 60 basis points.
Management said that the merchandise improvements may take some time and that first quarter trends would persist into the second quarter, guiding to a low to mid-single digit sales decline versus estimates for slight growth.
The company lowered its earnings guidance by 9% to $3.25-3.65/share and its net sales forecast to down 0-2% from up 1-2%.
Nordstrom is exiting a huge investment cycle that was meant to improve operations, but reduced mall traffic continues to weigh on sales, which makes this stock a tough sell to investors.
The stock trades at ~10x EPS, but there is no clear line of sight for sustainable long-term profit growth when the top-line remains under pressure.