(AP Photo/Elaine Thompson, File)
Dow Jones Newswires-Wall Street Journal | In the latest sign that the luxury market is rebounding, Nordstrom raised its fiscal 2010 forecast after reporting that its first-quarter profit rose 44 percent on increased store traffic and higher sales.
Still, the company’s shares fell about 2 percent to $40.50 in after-hours trading, because profits fell short of Wall Street’s expectations. The company’s stock has more than doubled since July of 2009, when it hit a low below $19.
For the quarter ended May 1, the Seattle-based department-store chain reported earnings of $116 million, or 52 cents a share, compared with $81 million, or 37 cents a share, a year earlier. To be sure, profits were still slightly lower than they were in the first quarter of 2008, when the company earned $119 million. Margins improved by 2.4 percentage points, as the company sold more merchandise at full price.
For fiscal 2010, Nordstrom raised its previous earnings outlook of $2.35 to $2.55 per share to a new range of $2.50 to $2.65. It predicts that same store sales will rise between 4 percent and 6 percent for the year.
After getting slammed with unprecedented sales declines last year, the luxury goods market is rebounding. Bain & Co. last month forecast that global luxury sales will rise 4 percent globally in 2010, to EUR158 billion, following an 8 percent drop last year. In October, when Bain last predicted 2010 sales, the firm was forecasting growth of just 1 percent.
Because it got hit earlier than its peers, Nordstrom, which operates 114 full line stores and 76 off-price Rack outlets, was one of the first of the high-end retailers to start adding a wider assortment of lower-price point items to appeal to more budget conscious consumers.
Earlier this month, Nordstrom reported same-store sales in April rose 7.5 percent, marking the company’s seventh consecutive month of positive results. For the quarter, same-store sales rose 12 percent.
In the first quarter, Nordstrom’s Rack division saw its sales rise 1.9 percent, compared with a 11.7 percent gain at full-line stores. Nordstrom opened two full-line stores and six of its discount Nordstrom Rack stores in the quarter. Nordstrom’s “Direct” division, which is mostly comprised of e-commerce, saw sales soar by 38.7 percent.
