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Nordstrom Shares Tumble After Wider Quarterly Loss, Tepid Sales Outlook

Nordstrom said supply chain bottlenecks, rising wages and shipping costs ate into its first quarter profit margins even as post-COVID demand provided a healthy boost to sales.

Nordstrom  (JWN)  shares slumped lower Wednesday after the struggling retailer posted a wider-than-expected first quarter loss as promotional sales ate into profit margins amid increasing competition among brick-and-mortar rivals.

Nordstrom reported a loss of $1.05 per share for the three months ending on May 1, nearly double the Street consensus forecast, even as net sales surged 44% from last year to an analyst-beating $2.92 billion. Promotions used to clear backed-up inventory, however, eroded gross margins, as did higher COVID-related costs such as wages and shipping. 

Nordstrom also affirmed its full-year sales guidance, which sees a 2021 gain of around 25%, but failed to match improving outlooks for rivals such as Macy's  (M)  and Kohl's  (KSS) .

"Looking ahead, the company is balancing inventory levels with sales while managing receipt flows to mitigate potential supply chain disruptions as the year progresses," CFO Anne Bramman told investors on a conference call late Tuesday. "Gross profit as a percentage of net sales decreased 260 basis points compared with the same period in fiscal 2019, primarily due to deleverage on lower sales and lower merchandise margins as we took action to reduce elevated inventories coming into the quarter, partially offset by permanent reductions in buying and occupancy costs."

"While COVID-19-related demand impacts are clearly moderating, the underlying cost environment remains volatile, with elevated labor and shipping costs, as well as apparel industry supply constraints, creating continued pressure," she added.

Nordstrom share were marked 7.2% lower in pre-market trading Wednesday to indicate an opening bell price of $33.85 each, a move that would trim the stock's year-to-date gain to around 8%.

"Although we expect ongoing consumer demand across the retail spectrum, with most stock reactions suggesting strength is well understood, we are wary of companies facing gross margin pressures now, as we worry what happens when promotions return to competitors as the year progresses," said BMO Capital Markets analyst Simeon Siegel, who carries a 'market perform' rating with a $28.00 price target on the stock.