(Reuters) - Nordstrom Inc warned on Tuesday that it would have to go through its off-price channel to clear some of its holiday merchandise inventory in the first quarter that piled up due to shipping delays.
Although some of the merchandise did not reach the shelves on time, the upscale department store chain reported a smaller-than-expected fall in quarterly revenue powered by online sales and its off-price business.
Nordstrom's focus on e-commerce, as consumers shift to shopping online in the wake of the health crisis, and the growth of its off price channel helped it bring in sales even amid restrictions.
Total revenue fell 19.7% to $3.65 billion in the fourth quarter from a year earlier, compared with estimates of $3.60 billion.
"The quarter was not without its challenges, and there were unanticipated headwinds ... We also exited the quarter with excess inventory that we are working quickly to address," Chief Financial Officer Anne Bramman said.
Nordstrom expects some pressure in gross margin as it aligns inventory in its first quarter, the time it expects its off-price Rack stores to return to normal inventory levels.
"There is no denying that their (Nordstrom) Q4 results were impacted, as fewer consumers go to offices and formal events," said Hilding Anderson, head of retail strategy at consulting firm Publicis Sapient.
"We expect apparel sales to rebound in the second half of 2021 as the vaccine rollout continues."
Sales at Rack decreased 23%. Digital sales of about $2 billion accounted for 54% of the retailer's business.
Nordstrom's shares were down about 2%.
For the holiday quarter, net income fell 83% to $33 million, largely hurt by higher markdowns and COVID-19-induced labor and shipping expenses.
On a per share basis, it earned 21 cents, beating the estimate of 14 cents, according to analysts surveyed by Refinitiv IBES.
(Reporting by Nivedita Balu in Bengaluru; Editing by Shinjini Ganguli)