Nordstrom Cuts Outlook After Disappointing Quarter--Update

By Maria Armental

Nordstrom Inc. on Thursday cut its financial projections for the year following worst-than-anticipated results for the first-quarter, as the retailer said it needed bigger discounts to clear inventory.

The results are the latest sign of woes among mall-based retailers. Over the past two days, Macy's Inc. reported its worst quarterly sales since the recession, and Kohl's Corp. posted a 87% drop in profit and an unexpected decline in sales.

Shares of Nordstrom, down 41% over the past 12 months, fell 17% to $37.47 in after-hours trading. Earlier Thursday, the stock set a new 52-week of $43.84 before closing at $45.23.

The retailer, struggling to revamp sales at its full-price stores, has reported lower profit in five of the past six quarters, including the three most recent quarters.

Blake Nordstrom, the company's co-president, said first-quarter results were hurt by lower-than-expected sales and, as a result, the company has made further adjustments to its inventory and expense plans. Among its other actions, the company said it plans to launch an expanded loyalty program, targeting the addition of 5 million customers.

For the year, the Seattle retailer now projects $2.50 to $2.70 a share in profit, with sales increasing 2.5% to 4.5%, compared with its earlier view of $3.10 to $3.35 in per-share earnings with sales increasing 3.5% to 5.5%.

The retailer now projects comparable sales, which include sales at stores open for at least a year and online sales, to range from a 1% decline to a 1% increase, down from its earlier view of flat to a 2% increase.

Over all, sales for the quarter ended April 30 rose 2.5% from the year earlier, while sales at stores open for at least a year fell 1.7%. Analysts surveyed by FactSet had projected an 0.1% increase in comparable sales.

But sales at the company's full-price stores, which account for the bulk of sales, declined 2.2%, with comparable sales at those stores falling 4.3%.

Meanwhile, sales at discount stores Nordstrom Rack and HauteLook rose nearly 12%, with comparable sales improving 4.6%.

In all, Nordstrom reported a profit of $46 million, or 26 cents a share, compared with $128 million, or 66 cents a share, a year earlier. The latest quarter included a charge related to higher credit expenses and severance costs.

Revenue, which includes the money it makes from its credit cards, rose 1% to $3.25 billion. Nordstrom sold its credit-card business in October.

Analysts surveyed by Thomson Reuters had projected a profit of 46 cents a share on $3.28 billion in revenue.

Inventory rose 5.4%, even as the retailer increased promotions and markdowns.

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

May 12, 2016 17:24 ET (21:24 GMT)

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