Nordstrom Rack Undercuts Luxury Retailer’s Holiday Sales

Nordstrom Rack store

Consumers pulled back on their spending during the holiday shopping season, according to Nordstrom.

During the nine weeks ended Dec. 31, sales at the Nordstrom Rack discount stores slipped 7.6% from the previous year’s holiday season, while those at Nordstrom were down 1.7%, the company said in a Friday (Jan. 20) press release.

“While we continue to see greater resilience in our higher income cohorts, it is clear that consumers are being more selective with their spending given the broader macro environment,” Nordstrom CEO Erik Nordstrom said in the release.

Rival retailer Macy’s had a rocky holiday season, too, reporting Jan. 8 that its fourth-quarter sales will come in at the lower end of its forecast due to pressures on consumers’ discretionary spending. The firm is to release its fourth-quarter results in early March.

“Based on current macroeconomic indicators and our proprietary credit card data, we believe the consumer will continue to be pressured in 2023, particularly in the first half,” Macy’s Chairman and CEO Jeff Gennette said at the time.

Together with its softer sales, Nordstrom saw a greater-than-expected need for promotions and markdowns, the company said in its Friday press release.

PYMNTS research found that budget-minded consumers were looking for bargains when choosing where to shop during the holiday season.

Sixty percent of consumers said they could be swayed by promotions and discounts, including 40% who said that would be the most important factor, according to “New Reality Check: The Paycheck-To-Paycheck Report: The Holiday Shopping Edition,” a PYMNTS and LendingClub collaboration.

Looking ahead, Nordstrom updated its fiscal 2022 outlook, saying it now expects revenue growth to fall at the lower end of its previous outlook of 5% to 7% and margins to drop due to markdown.

The company added that the markdowns enabled it to reduce its inventory levels to pre-pandemic levels.

“Having a healthier inventory level and mix positions us well to react quickly to changing consumer demand,” Nordstrom President and Chief Brand Officer Pete Nordstrom said in the release. “Given the continued uncertain environment, we remain focused on executing with flexibility and agility, including conservative buy plans and faster inventory turns.”

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