by John Russel Jones

The big dogs of retail had a rough day yesterday, with both Nordstrom and Macy’s reporting lowered earnings expectations.

Reuters reports slump due to inflation

Reuters reports that both 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, blaming the trend on the high price of gasoline and groceries that have prompted Americans to curb spending on apparel and other discretionary items, hitting sales at retailers and driving up inventories.

ABOVE: Image by Patrick Weissenberger for Unsplash

Rack drop has an impact

According to reports on Bloomberg, Nordstrom Inc. investors thought the retailer would be more insulated because of its affluent customer base, but the slower Nordstrom Rack business carried an impact.
“Now, Nordstrom will move to aggressively clear out inventory, a profit-eroding measure that’s also been necessary at other retailers, including Macy’s Inc. and Walmart Inc. After getting burned by supply-chain delays during the last holiday season, companies had ordered more goods to meet demand, only to see customers abruptly shift their spending priorities in the wake of easing pandemic restrictions and decades-high inflation.”
“Nordstrom shares sank 17% at 9:38 a.m. Wednesday in New York trading. The stock had gained 2.6% in 2022 through Tuesday’s close. Other retailers had already seen a big leg down in their stocks before earnings, like Macy’s, which had fallen 29% on the year before its results,” the Bloomberg story goes on to say.
A Nordstrom press release quoted Erik Nordstrom, the company CEO, “We delivered solid results in the second quarter, with topline growth, increased profitability and continued progress in our strategic initiatives. While our quarterly results were consistent with our previous outlook, customer traffic and demand decelerated significantly beginning in late June, predominantly at NordstromRack. We are adjusting our plans and taking action to navigate this dynamic in the short term, including aligning inventory and expenses to recent trends, and we remain confident in our ability to deliver on our long-term strategic and financial goals.”

Men’s apparel had strongest growth at Nordstrom

The release goes on to say that in the second quarter, men’s apparel had the strongest growth versus 2021, and shoes, women’s apparel, and beauty also had double-digit growth, as customers updated their wardrobes and returned to occasions.

Luxury, Bloomingdale’s is up

Macy’s, which also took a steep drop — down to 18.55 from a high of 37.37 last November — at opening this morning, reported that comparable sales were down 2.9% on an owned basis and down 2.8%, on an owned-plus-licensed basis, and that the company continued to see strength in occasion-based categories, including career and tailored sportswear, fragrances, shoes, dresses and luggage. On the other hand, Bloomingdale’s comparable sales on an owned basis were up 8.8% and on an owned-plus-licensed basis were up 5.8%.
“Despite inflationary pressures, consumers continued to shop Macy’s as a style source and leading gifting destination,” said chairman and CEO Jeff Gennett. “Additionally, Bloomingdale’s and Bluemercury captured demand for luxury brands, resulting in both nameplates outperforming in the quarter.”

Young investors: it ain’t over, yet

Although the economy has not officially been declared in recession, just yet consumer confidence markers are down. Another Bloomberg story yesterday reported today that “retail traders under 40 are becoming more gloomy,” especially since “Millennial and Gen Z investors are experiencing the highest inflation in their lifetimes.”