Nordstrom has reported an 8.3 per cent decline in sales during the second quarter as it continues to struggle in a market where consumers are tightening their belts.
However, analysts have noted that in Nordstrom’s case, the decline comes after strong growth in the same quarter a year ago and has been impacted by the company’s decision to close its Canadian business as well as a shift in the timing of its annual anniversary sale.
When those factors are removed the decline was a more modest 4 per cent – but for the first half of the year, sales are down 9.8 per cent.
“While it used to be one of the clear leaders in the retail pack, Nordstrom lost momentum during the pandemic and has failed to regain it ever since,” says Neil Saunders, MD at GlobalData.
“The issue for Nordstrom isn’t just the current quarter. It stems from the fact that the business has shrunk since the pre-pandemic era of 2019. Compared to the second quarter of that year, current sales are down by 3.1 per cent. This is despite the fact consumer spending has grown enormously over the period and spending within the prestige and accessible luxury end of the market – where Nordstrom plays – has been even more robust still,” said Saunders.
“That Nordstrom has failed to make any ground against this kind of backdrop is extremely concerning.”
The business took its biggest hit online, with e-commerce sales down by 31.1 per cent. Saunders attributed this to the shift of the anniversary sale, the winding down of the Trunk Club operation, and the ending of store fulfilment of Nordstrom Rack orders.
“However, beyond these things, we believe that Nordstrom online has become less of a destination for shoppers as more migrate to either brand-owned sites or switch to slightly lower-priced retailers. This underlines a wider issue of Nordstrom becoming less of a focal point among the demographics it serves.”
He said that while some of Nordstrom’s consumers are more insulated from the impacts of inflation, they are not immune to wider economic pressures and are retrenching. “Other, more occasional, shoppers have cut back even more sharply. Some of these things are outside of Nordstrom’s control, but they are not helped by a continued lack of discipline on the shop floor. Nordstrom stores are nowhere near as neat and compelling as they used to be, and this negatively impacts customer traffic and conversion.”
In conclusion, Saunders said that despite the sales declines the company managed to grow its net income. “But this is down to lower interest expenses and taxes, rather than better operational performance. To generate sustained profit gains, it will need to start growing its sales line.”
