Nordstrom Inc. fell sharply after the retailer said its net earnings for the fourth quarter ended Jan. 31 fell to $180 million from $255 million in the year-ago period.
The stock declined 7 percent to $49.05 in after-hours trading on Wall Street.
The company’s earnings before interest and taxes were $324 million compared with $465 million. The earnings before interest and taxes decline included $50 million in impairment charges primarily related to the full-line store in San Juan, Puerto Rico, in addition to other retail and technology assets.
Nordstrom’s results were impacted by last year’s incessantly promotional retail landscape and the company’s continued heavy investments in stores and technology. While not as promotional as other retailers in its sector, Nordstrom did step it up last year to remain competitive, which drove some sales but led to a 92-basis point contraction in margin.
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Net sales for the latest quarter reached $4.1 billion, a 5.2 percent gain from the $3.9 billion reached a year ago. Comparable-store sales were up 1 percent.
On a conference call with analysts, copresident Blake Nordstrom said: “As we look ahead to 2016, we’ve always considered 2015 to be a peak investment year. That hasn’t changed. What has changed is the current environment that we are facing, which requires us to pivot even more as we remain focused on improving profitability. In response, we are making adjustments to reduce expenses and capital expenditures in 2016 and in the coming years.”
Executives said that there will be a noticeable change in Nordstrom’s business model this year with greater focus on lowering costs, including moderating increases in tech spending and other areas, and after years of investing heavily to aggressively grow the business, “spending more time on how to turn that growth into profit.”
For the full year, net sales rose 7.5 percent to just over $14 billion, from $13.1 billion the year before. Comps increased 2.7 percent. Net earnings slid to $600 million from $720 million in 2014.
According to Pete Nordstrom, copresident, despite the tough selling environment, the Nordstrom Product Group for private brands, representing a bit over 10 percent of Nordstrom’s total business, had a good year, and brand partnerships such as with Topshop and Madewell have also been performing well. He also cited the beauty area, and designer shoes and handbags as good categories, while designer apparel is “under a bit of pressure.”
Last year, the company opened its first international flagship in Vancouver, grew nordstromrack.com/HauteLook about 50 percent to a $500 million business, opened a fulfillment center in Elizabethtown, Penn., and gave $2.4 billion back to shareholders through share repurchases and dividends.
This year, the company is looking for sales to gain by 3.5 percent to 5.5 percent, while comps range from flat to up 2 percent. Earnings per share are projected to range from $3.10 to $3.35.