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Macy's, Nordstrom cut profit views as excess inventory prompts discounts – Reuters

by admin
August 25, 2022
in Uncategorized
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The inside of a Macy's department store is seen in Douglaston, New York, U.S. January 5, 2017. REUTERS/Shannon Stapleton/File Photo
Aug 23 (Reuters) – Nordstrom Inc (JWN.N) and Macy's Inc (M.N) cut their annual earnings expectations on Tuesday as a slump in demand from inflation-hit customers left the department store chains with excess inventory that would require steep discounts to move.
Soaring prices of gasoline and groceries have prompted Americans to curb spending on apparel and other discretionary items, hitting sales at retailers and driving up inventories.
Nordstrom, whose shares fell 13% in extended trading, said the slowdown was more evident in its off-price chain – Nordstrom Rack – where customer traffic sank starting from late June.
Inventories were nearly 10% higher at Nordstrom and 7% at Macy's at the end of the second quarter, with the retailers planning heavy discounts to lower stock levels by the year-end.
"We have seen declining retail traffic and areas of weakening apparel sales over the quarter as the consumer faces higher costs on essential goods, particularly grocery," Macy's Chief Financial Officer Adrian Mitchell said.
The company sees fiscal 2022 adjusted earnings of $4.00 to $4.20 per share, down from $4.53 to $4.95 per share.
Nordstrom expects annual sales to rise 5% to 7%, compared with 6% to 8% previously. Adjusted profit per share is forecast to be $2.30 to $2.60, down from $3.20 to $3.50.
The downgrades came despite better-than-expected quarterly earnings that showed sales of formal wear and luxury goods were holding up, thanks to affluent consumers and a return to the office and social events.
Comparable sales rose 5.8% at Macy's upscale Bloomingdale's department stores and 7.6% at its luxury beauty outlet Blue Mercury.
"While its more affluent shoppers are more insulated from inflation, they are not completely immune to it," said GlobalData managing director Neil Saunders.
"Our data shows confidence is now sliding among higher income segments, and this is likely to drag down future growth."
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