Store traffic slows, but Nordstrom.com and online sales at Nordstrom’s off-price sites increase by double digits. Canadian retailer Hudson's Bay says its Q1 results were hurt slowing store traffic and a continued shift to e-commerce.

Nordstrom Inc. isn’t escaping retail’s steady decline, following peers in posting weak sales.

Nordstrom, No. 17 in the Internet Retailer 2017 Top 500 and the largest upscale department-store chain in the U.S., is suffering from sluggish store traffic and consumers’ growing preference to buy online. The company is betting it can buck the trend and entice younger shoppers by expanding its assortment of exclusive brands, like J. Crew (No. 50), Madewell and Topshop, which is owned by Arcadia Group Ltd., No. 64 in the Internet Retailer 2016 Europe 500.

Online sales in the fiscal first quarter ended April 29 accounted for 24% of total sales, driven by 10.9% online sales growth at Nordstrom.com and 19.1% at Nordstromrack.com/HauteLook. In the year-ago quarter, online accounted for 20.7% of sales.

The Seattle-based company’s earnings missed Wall Street estimates as comparable-store sales declined 0.8% year over year. Analysts had forecast a break-even quarter. The results may deepen investors’ pessimism regarding retail and specifically department stores, since it follows drops in comparable sales from Macy’s Inc. (No. 6 in the Top 500) and Kohl’s Corp. (No. 18) that also exceeded forecasts.

Hudson’s Bay Co. (No. 81), parent of Saks Fifth Avenue, previewed its not-so-great quarter.

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The Canadian retailer said online sales in fiscal Q1 ended April 29 increased 5.4% on a constant currency basis. When excluding sales by its flash-sale site Gilt, HBC’s comparable digital sales rose 13.2% on a constant currency basis, the retailer said Thursday in releasing preliminary results. Total comparable sales decreased 2.9% year over year. Hudson’s Bay will report full first quarter results on June 8.

“The first quarter of the year has remained difficult, particularly in the US, where we have seen lower store traffic across our banners,” CEO Jerry Storch said. He noted that apparel retail has been further affected by a “highly promotional environment, and the continued channel shift of in-store sales to online sales.”

Hudson’s Bay Co., which also operate Hudson’s Bay, Off Saks, Lord & Taylor and Europe’s Galeria Kaufhof, “remains focused on our all-channel model: offering compelling merchandise in innovative online and in-store shopping environments,” Storch said. “Most importantly, we are driving towards the seamless combination of both to deliver one powerful customer experience.”

Comparable sales at Nordstrom’s full-price stores and website slipped 2.3% in fiscal Q1, a steeper decline than the 1.0% dip analysts expected. Even the retailer’s discount-focused chain struggled. Same-store sales at the company’s Nordstrom Rack business fell 0.9%. Analysts had expected sales by that measure to be flat compared with last year.

The company reiterated its forecast of $2.75 to $3 a share and flat comparable sales for 2017. Through Thursday’s close, Nordstrom shares have fallen 3.6% this year, compared with a 7% gain for the S&P 500 index.

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Nordstrom also discussed Bonobos, an online retail partner that faces a change in ownership. Wal-Mart Stores Inc. is in talks to acquire Bonobos for about $300 million, according to a person familiar with the situation.

Nordstrom doesn’t currently foresee any changes in its relationship with the startup, co-president Erik Nordstrom said on a conference call. The department store also has a good relationships with Jet.com, another e-commerce retailer owned by Wal-Mart (No. 3), he said.

The Nordstrom Rewards loyalty program, which changed in May 2016 to allow customers to earn benefits regardless of how they choose to pay, has more than 8.6 million active Rewards customers in the U.S. and Canada, a 70% increase from about 5.0 million a year ago. Nordstrom Rewards customers represented 47% of fiscal Q1 sales, compared with 39% in Q1 2016.

For the fiscal first quarter ended April 29, Nordstrom reported:

  • Net sales of $3.279 billion, up 2.7% from $3.192 billion last year.
  • A comparable sales decline, including online and bricks and mortar, of 2.3%.
  • Net earnings of $63 million compared with $46 million.
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