Nordstrom's Sales Drop; Decline Shows A New Trend In Shopping?

Nordstrom's sales have reportedly dropped in the first quarter. The retailer has also cut its profit expectations for the year.

The New York Times reported that the company's shares have plunged to 16 percent in after-hours trading last Thursday. Nordstrom sells apparel and cosmetics from brands such as Armani, Stella McCartney and Valentino.

"Our first-quarter results were impacted by lower-than-expected sales," Blake Nordstrom, the company's co-president, 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 retailer's top rivals, Macy's and Kohl's, have also reported depressing first quarter sales. Kohl's shares fell to more than 9 percent while Macy's dropped by half a percent.

Since last year, department store operators have been hit with the decline as consumers choose to spend their money on smartphones and electronics. Customers also opt to dine out and travel as well as invest in assets like cars and homes.

Nordstrom revealed that it took to giving heavy discounts to clear out unsold items in the first quarter. The company has slashed its adjusted profit forecast for the year ending Jan. 2017 to $2.50 to $2.70 a share from $3.10 to $3.35.

The retailer's net income for the first quarter, which ended on Apr. 30, fell by nearly two-thirds to $46 million or 26 cents a share. Its total revenue rose 1.1 percent, to $3.25 billion. Nordstrom's sales at stores open for at least a year dropped by 1.7 percent.

According to Business Insider, the Nordstrom sales decline seems to confirm that wealthy shoppers are curbing their spending habits. Apparently, American consumers are already refusing to pay full price for anything.

"Notably, this shortfall was entirely driven by lower trips/transactions," Morgan Stanley analysts wrote. "We think retailers exposed to the high-end consumer are most at risk to a further sales step-down in 2016."

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