The past week has not been kind to retail stocks. A seemingly endless parade of missed expectations was capped off after the market closed Thursday when Nordstrom Inc. (NYSE: JWN) reported a same-store sales decline of 7.7% and an earnings per share (EPS) drop of nearly 61%.
Nordstrom has not reported a same-store sales decline since the third quarter of 2009. And it is pretty safe to say that no analysts were looking for an EPS decline of that magnitude.
The company blamed the sales decline on less traffic and increased promotional activities, and on the conference call Thursday evening, co-president Blake Nordstrom said that company recognizes “that the pace of change is increasing.” That’s a start, but it might have been better to recognize that several years ago.
Is the retail sector, and especially its big department store chains, going to follow other sectors (newspapers and the music business leap to mind) into a descending spiral that won’t end until the old players learn to play by a new set of rules and settle for a changed market with lower margins?
In a nutshell, brick-and-mortar retailers are all competing against Amazon.com Inc. (NASDAQ: AMZN), and first recognizing that and then adapting their business models to deal with it are the keys to long-term survival.
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