Nordstrom posts surprise profit as inventory woes ease

(Reuters) -Nordstrom Inc posted a surprise quarterly profit and estimate-beating revenue on Wednesday as better inventory control and demand from wealthy shoppers helped the company defy an inflation-driven slump in retail spending.

Shares of the upmarket department store chain jumped 9.4% in extended trading, as the company also maintained its forecasts for 2023 sales and adjusted profit, and signaled improving sales at its off-price Rack banner.

Affluent Americans are still spending on clothing as return-to-office trends and other social gatherings drive up demand for dresses and formal wear. Heavy promotions and discounts aimed at clearing excess inventories have also drawn more shoppers.

After grappling with outdated product assortments and low stocks in key categories, Nordstrom (NYSE:) has tried to improve its inventory controls and leaned on popular national brands to help drive traffic to its stores.

Its inventory decreased 7.8% at quarter-end, with activewear, beauty and men’s apparel performing well in the three months ended April 29.

The company also reported a 110-basis-point increase in quarterly gross margin as easing cost pressures also helped.

While quarterly sales at Rack fell 11.9%, Nordstrom said trends improved later in the quarter. The company has also been opening new Rack stores in a bid to attract more budget-conscious shoppers.

Nordstrom joins apparel chain Abercrombie & Fitch Co in bucking a broader gloom in retail, after companies ranging from Target Corp (NYSE:) to Home Depot Inc (NYSE:) all issued cautious forecasts for the year.

Total revenue at the company fell to $3.18 billion in the quarter, from $3.57 billion a year earlier. Analysts on average had expected $3.12 billion, according to Refinitiv IBES data.

On an adjusted basis, Nordstrom reported a profit of 7 cents per share, compared with estimates for a loss of 13 cents per share.