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Stubbornly high inflation has resulted in higher rental, food and consumer prices, pushing people, especially at the lower income rung, to shop at discount stores and off-price retailers than at department stores or specialty retailers.
In January, Nordstrom said lower-income consumers, its discount store Rack’s core base, were cutting back on spending on non-essentials, as recession fears swirl.
The company’s efforts to capture a shift to trading down in the banner have been hampered by inventory problems sparked by pandemic-induced supply disruptions.
Net sales in its eponymous stores fell 2.4%, while Nordstrom Rack posted an 8.1% decline.
“We do not see a realistic path to profitability for the Canadian business,” Chief Executive Officer Erik Nordstrom said.
Nordstrom Canada’s e-commerce platform will cease operations on March 2 and the in-store wind-down is anticipated to be completed by late June.
The company expects to report about $300 million to $350 million of pretax charges related to the winddown in the first quarter.
Discontinuing Canadian operations would also result in about $400 million decline in total net sales and a $35 million improvement in total earnings before interest and taxes (EBIT) in fiscal 2023.
The company projects fiscal 2023 revenue to fall 4% to 6%, while analysts on average expect a 0.07% rise, according to Refinitiv IBES data.
The department store chain forecast fiscal 2023 adjusted profit per share of $1.80 to $2.20, while analysts on average expect $1.94 per share. This exclude any charges related to the winddown of Canadian operations.
Shares of the company fell marginally in extended trading after the company missed fourth-quarter revenue expectations.
