Nordstrom loyalty, online plans cost more than expected
(Reuters) - Nordstrom Inc on Thursday said it expected an even bigger impact on this year's gross margin from its efforts to win more customers through its loyalty program and anticipates spending more on its growing e-commerce business.
The high-end retailer, which also operates the Nordstrom Rack chain of lower-priced outlet stores, now expects its gross profit margins to fall by at least 0.4 percentage point, compared to a previous floor of 0.35 points, as it spends money on its Fashion Rewards program, an essential tool for winning over shoppers and gathering data on their spending habits.
It also now expects to spend at least $340 million in the fiscal year ending in January on expenses that include investments in its online business, up from a minimum of $325 million. Online sales rose 38 percent last quarter.
"They need to make sure the online experience is at the same level as the in-store experience," said Morningstar analyst Paul Swinand.
Shares were down $2.15 at $53.25 in after-hours trading, following a 3.2 percent drop in regular trading before the results were released.
The investments prevented Nordstrom from raising the top end of its fiscal-year profit forecast. The company now expects to earn $3.45 to $3.50 per share, compared with a previous range of $3.40 to $3.50 per share and analysts' forecasts of a $3.49 per share profit, according to Thomson Reuters I/B/E/S.
Nordstrom now expects same-store sales to rise 6.5 percent to 7 percent this year, versus an earlier forecast of a 6 percent to 7 percent increase.
Nordstrom's net income for the quarter ended on October 27 rose 15 percent to $146 million, or 71 cents per share, from $127 million, or 59 cents per share, a year earlier. That was 1 cent below analyst expectations.
As previously reported, revenue rose 13.8 percent to $2.71 billion, while same-store sales were up 10.7 percent.
(Reporting by Phil Wahba in New York; Editing by Nick Zieminski)
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