Photo: Nordstrom
Nordstrom last week became the latest retailer in the apparel space to lower its outlook as it found that deeper discounts were required to clear slow-moving holiday merchandise.
Nordstrom’s sales in the nine weeks ended Jan. 1 were down 3.5 percent, with Nordstrom Rack fairing worse (down 7.6 percent) than full-line stores (off 1.7 percent).
“The holiday season was highly promotional, and sales were softer than pre-pandemic levels,” said Erik Nordstrom, CEO, in a statement. “While we continue to see greater resilience in our higher income cohorts, it is clear that consumers are being more selective with their spending given the broader macro environment."
The additional markdowns resulted in year-end inventory levels down by a double-digit percentage versus last year and roughly at 2019 levels. Management is planning to focus on driving expense efficiencies and tightening buys.
Macy’s in early January indicated holiday-quarter sales would come in at the lower end of its expected range and warned of continued consumer pressures through the first half of 2023. Last week at the NRF Big Show, Macy’s CEO Jeff Gennette said gift-giving periods were healthy over the holiday selling season, but that the “lull” period — the first few weeks of November and second and third weeks of December when consumers typically purchase for themselves — was “more pronounced this year than in years past.”
Among other major apparel players, Lululemon’s shares tumbled in early January after the chain said fourth-quarter gross margin would arrive below plan due to discounts. Kohl’s and Gap earlier in the year slashed their guidance as promotional pressures on elevated inventories.
On its third-quarter analyst call, Erik Nordstrom said sales had begun to soften in late June, mostly at Nordstrom Rack, but both banners felt pressures from customer segments with the lowest income profiles in the third quarter.
He said the Rack banner continued to shift its emphasis to premium brands as part of its turnaround, while expense and inventory controls were being prioritized given the uncertain marketplace. He said, "The capabilities we built with our closer-to-use strategy, digital assets and supply chain optimization prepare us to manage short-term pressures.”
- Nordstrom Reports Holiday Sales, Updates Outlook – Nordstrom
- Macy’s, Inc. Provides Fourth Quarter 2022 Update Ahead of the ICR Conference – Macy’s
- Keeping an eye on opportunity, Macy’s moves ahead – National Retail Federation
- lululemon athletica inc. Updates Revenue and Earnings Expectations for the Fourth Quarter - Ahead of the ICR Conference – lululemon
- Nordstrom (JWN) Q3 2022 Earnings Call Transcript – The Motley Fool