Nordstrom Takes Hit on E-Commerce Expenses

Retailer Nordstrom Inc reported a quarterly profit below Wall Street's expectations after pouring tens of millions of dollars into its e-commerce business, and said it would spend more on that during the rest of the year than previously estimated.

Nordstrom, known for its upscale department stores, said expenses to support sales, particularly online sales, were 18 percent higher in the first quarter than last year. Its gross profit for the quarter, ended April 28, also took a hit from free shipping and improvements to its loyalty program.

Shares were down 3.3 percent in after-hours trading, after slipping 0.7 percent on Thursday.

Its efforts proved fruitful: its direct sales rose 44.2 percent in the quarter, but at a cost.

The retailer, which operates 117 department stores and 110 lower priced Rack stores, said it raised by $10 million its estimate for how much it will spend to spur e-commerce sales and now sees a range of $275 million to $340 million this fiscal year.

The company expects gross margin to be down 0.7 to 0.9 percentage points in the current quarter.

Nordstrom's net income for the first quarter rose 2.8 percent to $149 million, or 70 cents per share, from $145 million, or 65 cents per share, a year earlier.

That was 5 cents below what Wall Street was expecting, according to Thomson Reuters I/B/E/S.

As previously reported, Nordstrom said same-store sales rose 8.5 percent while total sales increased 13.7 percent to $2.53 billion.

Nordstrom affirmed its full-year earnings forecast of $3.30 to $3.45 per share, below Wall Street's forecast of $3.48. It also said that same-store sales would rise 4 percent to 6 percent.

Sales at stores open at least one year would rise about by a low single-digit percentage in the current quarter, the retailer said.