February 16, 2012 / 11:05 PM / in 6 years

UPDATE 3-Nordstrom sees sales up but profit view falls short

* Sees FY EPS $3.30-$3.45 vs Street View $3.59

* Sees FY same-store sales up 4-6 percent

* Q4 EPS $1.11 vs Street View $1.09

* Shares down 1.3 percent after hours

By Phil Wahba

Feb 16 (Reuters) - Nordstrom Inc gave a profit forecast that missed Wall Street's expectations and said its gross profit margin would dip this year as it invests in beefing up its fast-growing online business.

Shares slipped 1.3 percent to $51.80 in afterhours trading.

Nordstrom said sales at stores open at least one year would rise 4 percent to 6 percent in the fiscal year that ends next January after increasing 7.2 percent last fiscal year.

But the upscale department store operator, which tends to give conservative profit forecasts, said it expects earnings of $3.30 to $3.45 per share for the fiscal year ending next January, below the $3.59 per share expected on average by Wall Street analysts, according to Thomson Reuters I/B/E/S.

It also said gross margin, a gauge of the profitability of the items it sells, would fall by as much as 0.35 percentage points.

"That could come from free shipping," said Keybanc Capital Markets analyst Ed Yruma, noting that concerns about gross margin were behind the share decline.

Nordstrom Chief Finance Chief Michael Koppel said on a conference call with analysts that the retailer would spend $140 million this year on strengthening its e-commerce capacity, compared to $100 million last year. Online sales rose 35 percent during the holiday quarter.

Koppel said that e-commerce would fuel growth in terms of sales rather than margin given all these investments.

Nordstrom Inc started offering free shipping last August on orders placed on its website regardless of size to boost online sales.

The Seattle-based chain said it expected to spend between $480 million and $520 million on capital expenditures, up from $430 million last year, with most of the increase going to its e-commerce capabilities.

Nordstrom's net income for the quarter, ended on Jan. 28 edged up to $236 million, or $1.11 per share, from $232 million, or $1.04 a year earlier. That was above the $1.09 per share analysts were expecting, according to Thomson Reuters I/B/E/S.

Nordstrom, which now operates 117 department stores and 104 Rack outlets, plans to open another department store next month and a total of 15 new Racks this fiscal year, including 12 locations that it has identified.

The Rack sells less expensive merchandise, much of it unsold clothing from the full service stores, and the outlet chain has been the focus of its expansion.

Erik Nordstrom, who oversees the chain's stores, on the call said there was room for another eight full service stores or so in all. The chain plans on keep opening about 15 new Racks a year. The retailer confirmed it is still looking to expand into Canada but one executive said it has been hard to find appropriate real estate there.

Shares ended up 2.3 percent at $52.18 in regular trading hours.

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