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May 24, 2022

Nordstrom raises forecast in sign luxury shoppers still spending

Nordstrom raises its forecast for earnings and profit due to customers 'high income profile'

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Nordstrom Inc. raised its forecast for earnings and revenue for the coming year, the latest sign that higher-end U.S. retailers are optimistic that affluent shoppers will keep spending even in an era of high inflation. The shares jumped in late trading. 

Net sales increased almost 19 per cent to US$3.47 billion in the fiscal quarter ended April 30, the department-store operator said Tuesday in a statement. That’s above analysts’ average estimate of US$3.27 billion. Sales at both Nordstrom and its off-price Rack business were stronger than what analysts had been looking for.

Nordstrom now sees revenue growth, including credit-card sales, of six per cent to eight per cent this year -- an upgrade of a full percentage point from the company’s March forecast.

The results show the divergence among retailers catering to high-end clients and those selling to mass-market shoppers. In recent weeks, a growing array of companies have downgraded their expectations for the year as higher costs eat into profits and inflation erodes the purchasing power of lower income shoppers.

“At this point, we have not seen inflationary cost pressures adversely impact customer spending, which we believe is due to the higher income profile and resiliency of our customer base,” Chief Financial Officer Anne Bramman told analysts.

The fashion retailer raised its forecast for earnings per share to the range of US$3.38 to US$3.68, excluding the impact of share repurchase activity. Nordstrom also booked a US$10 million impairment charge related to its Trunk Club property, a service that’s similar to Stitch Fix and allows shoppers to try on clothes at home before they purchase them. The retailer said it will wind that service down. 

Nordstrom shares rose 12 per cent at 4:36 p.m. in extended New York trading. The stock had declined 8.6 per cent this year through Tuesday’s close, better than the performance of the Russell 1000 Growth Index over the same period.

The company also announced it will become a retail partner of Allbirds Inc., the sneaker startup that went public last year. Nordstrom will offer Allbirds products in select stores June 1, with plans to sell them online later in the summer. Allbirds shares rose in late trading after the announcement.