Nordstrom Hurt by Soft Demand From Lower-Income Shoppers

Cost-conscious shoppers continue to shy away from Nordstrom, with the luxury retailer still feeling the effects of a paycheck-to-paycheck economy in the form of declining sales.

“Nordstrom Rack Sales declined 2% versus last year as we continued to see softening demand, especially within our lower-income customer groups,” CEO Erik Nordstrom told investors during an earnings call Tuesday (Nov. 22) evening.

This trend led the company to reduce Rack store-based order fulfillment and increase the minimum order amount to receive free eCommerce ship-to-store delivery, said Nordstrom.

“These actions reduced our order cancellations, simplified rack operations, and improved profitability but negatively impacted top-line growth at the Rack by approximately 200 basis points,” the CEO said.

The company also saw a 16% drop in digital sales, which it attributed to its anniversary sale — its largest sales event — moving to the second quarter, as well as reducing store fulfillment for Nordstrom Rack digital orders during the third quarter and ending its Trunk Club.

The report marks the second quarter in a row in which Nordstrom has cited a drop in enthusiasm from its lower-income shoppers to explain dwindling sales. While the company’s net sales rose 12% year over year during its second quarter, they started to slow in June, particularly among lower-income customers.

Those customers, the company has said, typically shop at Nordstrom Rack rather than the flagship store.

Nordstrom’s report comes just before a holiday shopping season in which it and other retailers could find themselves pinched by customers who either can’t or won’t spend, as PYMNTS noted earlier this month.

Our latest study on consumer sentiment found that two-thirds of consumers say they are “very” or “extremely concerned” about the outlook for the coming months.

Get the report: Consumer Inflation Sentiment: Inflation’s Long Consumer Spending Shadow

Eighty percent reported that inflation makes them worried about the future. And 45% of consumers told PYMNTS the day-to-day struggle of keeping up with bills has caused their view of the future to curdle.

For many consumers, that future will contain a recession, something 62% of people surveyed by PYMNTS expect to happen. Meanwhile, roughly 6 out of every 10 consumers said their income has at best remained the same, relative to price increases, or at worst has declined.

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