Dive Brief:

• Nordstrom shares sank 17% in after-hours trading after a devastating report of slow traffic and lower-than-expected sales in the first quarter of fiscal 2016. The retailer said profit for the first quarter was $46 million, down 64% from $128 million, year over year.

• First quarter net sales were $3.2 billion, up 2.5% from $3.1 billion, year over year. Q1 same-store sales decreased 1.7%, while analysts had expected them to be flat, according to Reuters. 

• Nordstrom now forecasts a 2.5% to 4.5% increase in sales for its full year, down from its earlier  estimate of a 3.5% to 5.5% increase. The retailer also forecasted a 1% decrease to 1% increase in same-store sales, down from its earlier estimate of a 0 to 2% increase.    

Dive Insight:

With yet another disappointing quarter, it’s now clear that Nordstrom is not immune to the troubles plaguing American department stores. On a conference call with analysts Thursday, executives said that it continued to move excess inventory by slashing prices, hitting margins hard.

Nordstrom joined a slew of apparel retailers that also reported dismal earnings recently, including Kohl's, Macy's, and Gap, highlighting the troubles these companies are facing as malls see less foot traffic and competition from fast-fashion and off-price retailers increases. 

But it’s also clear that Nordstrom, long a big player in e-commerce for a department store, is feeling the sting of low margins online, too. It’s responding by reining in supply chain costs and removing poorly selling merchandise.

“In our supply chain, we have an ongoing opportunity to improve the unit economics of product delivered to customers,” CFO/EVP Michael G. Koppel said on the call. “We are refining our online assortment through greater focus on key brands and categories while editing less profitable items. We're also improving our merchandise allocation process between stores and fulfillment centers, leading to a reduction in split shipments, lower cancelation rates, and better in-stock positions, all of which ultimately improve our customer experience.”

Nordstrom enjoys a special level of loyalty among shoppers, and Thursday said it would make it easier, starting in the second quarter, for its customers to benefit from that by introducing the ability to earn rewards even when they don’t use a Nordstrom card.

“With 4.7 million active members, sales from members represented 38% of sales,” the company said in a press release. “To build on the success of its loyalty program, the company plans to expand its program with a tender-neutral offering in the second quarter.”

That jibes with what Shelley E. Kohan, VP of retail consulting at store analytics firm RetailNext, told Retail Dive is the department store’s customer service culture: “In my opinion, they use design thinking,” Kohan told Retail Dive. “They put the customer in the center, and they think, ‘How does this impact the customer?’ I think they constantly say, ‘How do we remove pain points?’ A good example is when they recently announced that they’ll take back returns from full-line stores at their [off-price] Rack stores.” 

And that bodes well for its future, provided that shoppers respond.