Nordstrom profit misses estimates as heavy discounting hurts

Department store operator Nordstrom Inc reported a lower-than-expected quarterly profit as it was forced to discount more to clear excess inventory from the holiday season, sending its shares down more than 8 percent in extended trading.

The company also said it would cut $300 million from its capital spending of $4.3 billion over the next five years as it plans to invest less on stores.

Department store operator Nordstrom Inc reported a lower-than-expected quarterly profit as it was forced to discount more to clear excess inventory from the holiday season, sending its shares down more than 8 percent in extended trading.

The company also said it would cut $300 million from its capital spending of $4.3 billion over the next five years as it plans to invest less on stores.

"With our increased investments to gain market share, along with a changing business model, expenses in recent years have grown faster than sales," Chief Financial Officer Mike Koppel said on a conference call.

Some of the areas targeted for cost cutting include shipment, technology and online product assortments.

Unseasonably warm winter has affected sales at a number of apparel retailers, including Nordstrom and rivals Macy's Inc and Kohl's Corp.

"They were about 5-7 percent more promotional in the fourth quarter than a year ago. For a company that does not promote much, like Nordstrom, that's meaningful," said Dan Hess, chief analyst at research firm Merchant Forecast.

Analysts said a slowdown in spending on high-end goods may have also weighed on Nordstrom, which sells apparel, cosmetics and accessories from premium brands such as Armani, Stella McCartney and Valentino.

A lot of newer initiatives at Nordstrom over the past two years have been at the high end, Hess said.

"They are more exposed to their luxury customer today than they were two years ago," he added.

Net income fell to $180 million, or $1 per share, in the fourth quarter ended Jan. 30 from $255 million, or $1.32 per share, a year earlier.

Excluding items, the company earned $1.17 per share, missing the average analyst estimate of $1.22, according to Thomson Reuters I/B/E/S.

Revenue rose 3.7 percent to $4.19 billion, while analysts were expecting $4.22 billion.

Sales at Nordstrom stores open at least a year rose 1 percent, above the 0.4 percent growth expected by analysts polled by research firm Consensus Metrix.
Nordstrom also forecast earnings of $3.10-$3.35 per share for the year ending January 31, 2017. Analysts were estimating $3.37 per share.

The company's shares, which have fallen 17 percent since it reported weak third-quarter results in November, fell 8.3 percent to $48.35 on Thursday.