Nordstrom said Tuesday it is changing its leadership structure to retire its co-presidency, and naming Erik Nordstrom as its sole CEO.
It announced the changes as it reported fourth-quarter earnings and sales that missed analysts' estimates, sending shares tumbling. Its stock initially cratered more than 10% in after-hours trading following the release. Shares were recently down about 7.5%.
Nordstrom also said it will be shrinking its board to 10 directors from 11, and establishing a new 10-year limit for members. Both of its former co-presidents, Erik and Pete Nordstrom, will remain on the board. Pete will become president of Nordstrom Inc. and chief brand officer, the company said.
"These titles help clarify our respective roles, as we strive to maximize our impact both as individual leaders and as a team," Erik said in a statement about the leadership changes. "Pete and I continue to be partners in ensuring Nordstrom's success, and we are both focused on executing our long-term plan."
Here's how Nordstrom during its fiscal fourth quarter did compared with what analysts were expecting, based on data pulled from Refinitiv:
Net income for the quarter ended Feb. 1 fell to $193 million, or $1.23 per share, compared with $248 million, or $1.48 a share, a year ago.
Excluding one-time items, Nordstrom earned $1.42 per share, which was short of the $1.47 expected by analysts polled by Refinitiv.
Total revenue grew to $4.54 billion from $4.48 billion a year ago, also short of the $4.56 billion expected by analysts.
Nordstrom said full-price net sales during the quarter rose 1%, and off-price net sales — for its Nordstrom Rack division — were up 1.8%. Digital sales climbed 9% and represented 35% of total sales, compared with 33% a year ago.
Looking to fiscal 2020, Nordstrom is calling for net sales to climb 1.5% to 2.5%. It said this outlook does not include any hit from the coronavirus outbreak. It is calling for annual earnings per share to fall within a range of $3.25 to $3.50. Analysts had been calling for earnings of $3.49 a share, according to Refinitiv data.
Nordstrom's results fall on the heels of Kohl's reporting fourth-quarter results Tuesday morning that topped analysts' estimates. But Kohl's still cited weakness in its women's apparel business. Macy's and J.C. Penney have likewise been struggling to grow apparel sales.
Faced with similar challenges, Nordstrom has been trying new things to woo more shoppers to visit its stores or buy online. It has opened Local shops in Los Angeles and New York that do not carry any inventory, but instead offer services like alterations and online order pickup. It has partnered with up-start digital brands such as Allbirds and Glossier to sell their shoes and makeup in Nordstrom stores.
In January, Nordstrom launched a new business venture called See You Tomorrow, where it is selling used clothing in its new flagship store in New York and on its website. In doing this, the company is hoping to mimic the success of resale start-ups such as Poshmark and ThredUp. It is also testing selling used clothing, via a partnership with Rent the Runway, in a handful of its Nordstrom Rack shops.
"Nordstrom is not in the parlous state of other weak department store players, mainly because it has invested in its business," GlobalData Retail Managing Director Neil Saunders said.
However, the company "will still fall short of its potential," he said, adding that Nordstrom still has work to do to be "sensitive to local needs."
Nordstrom has poured money into its shiny new department store in New York, which opened last October. But some analysts worry the company has devoted too many resources to those efforts.
Separately, Nordstrom said Tuesday that current board members Kevin Turner and Gordon Smith have chosen not to seek reelection. It said its board is working with an external executive search firm to fill their seats.
The third Nordstrom brother, Blake, who had also been co-president, died last year of lymphoma.
Nordstrom shares have fallen about 28% over the past 12 months. The company has a market cap of about $5.3 billion.
CORRECTION: Nordstrom is shrinking the size of its board to 10 directors from 11. An earlier headline said the board's size would increase.