Nordstrom posted earnings per diluted share of $0.26, down from an expected $0.45 per share and also down from $0.66 per share a year ago. The company brought in $3.25 billion, down from an expected $3.28 billion and about even from this time last year. Nordstrom also lowered expectations for full-year revenue (cut by 1 percent) and earnings (cut by $0.60 per share).
“Our first quarter results were impacted by lower than expected sales,” Nordstrom co-president Blake Nordstrom said in a statement. “In response we have made further adjustments to our inventory and expense plans. As the pace of change in retail continues to accelerate, we remain committed to serving customers by taking steps that will continue to meet their expectations while driving profitable growth.”
The earnings report points to a larger trend of retailers seeing slower brick-and-mortar mall traffic and competition from other e-commerce companies like Amazon. Both Macy’s and Kohl’s disappointed investors after posting their respective earnings results this week.
On today’s earnings call with analysts, Nordstrom CFO Mike Koppel noted that “we are seeing a transformation in our business model.”
While Koppel added that the company’s e-commerce arm “continues to grow at a good pace” and the impact of technology on the customer experience “continues to accelerate,” Nordstrom is currently revamping its digital strategy.
In recent years, it had been investing heavily in technology, spending $300 million annually in an effort to compete more effectively with Amazon and others. However, those investments haven’t been paying off as much as the company hoped. Koppel told analysts earlier this year that the retailer would focus its tech initiatives on “fewer, more meaningful projects” while “accelerating our efforts to re-platform our architecture to streamline development while reducing costs.”
Nordstrom followed those statements by cutting approximately 120 jobs from its technology team in March, and subsequently announced plans to cut as many as 400 additional jobs across the company. Last week, GeekWire reported that three top leaders within Nordstrom’s technology department had left the company.
In April, Nordstrom said the “new operating model” in its tech group was “focused on strengthening its ability to deliver on e-commerce and digital initiatives, and proactively addressing opportunities to improve supply chain and marketing effectiveness.”
Nordstrom said today that it is investing in a more “seamless experience across stores and online,” while it continues to develop a scalable merchandising solution. Executives repeated that the company is focused on improving supply chain efficiency and marketing effectiveness.
Nordstrom also announced today that it is expanding its rewards program on May 18 by allowing those who don’t have the company’s card to earn rewards — a “tender-neutral offering”, it noted. Today, 20 percent of Nordstrom’s customers are rewards members, and they contribute to 40 percent of the company’s total sales and spend four times more annually than non-members. Over the next year, Nordstrom hopes to add five million customers to the program — that’s more than double from the current 4.7 million members.
Koppel said expanding the rewards program to non-cardholders will help increase loyalty and long-term sales. In an attempt to grow its program, Nordstrom is perhaps taking a page out of Starbucks’ playbook, as the coffee maker now has 12 million U.S. reward members, representing a 16 percent year-over-year increase and 8 percent from the most recent quarter.