Nordstrom's projections of a second-quarter slump, announced late last month, came to a jolting reality. And they were even worse than expected. The Seattle-based retailer reported a second-quarter net income fall-off of 36 percent, to $45.4 million. The projection was for a 24 percent drop.
Much of the earnings drop was attributed to a $10.5 million pretax charge taken due to an investment in Streamline.com, an online grocer. Streamline has struggled and its market value has dropped. Nordstrom said it invested $33 million in the online venture; as of earlier this week, Streamline's quoted market value was $15.2 million. Nordstrom indicated it was likely to take yet another charge in the third quarter.
However, issues in the real-time retailing world also contributed to the poor performance. The company reported that total second-quarter sales had been basically flat – $1.45 billion this year compared to $1.44 billion in 1999. Same-store sales fell 4.5 percent from a year ago. The problem was the basic bad-business bugaboo: lower prices, higher expenses. Prices were cut throughout the quarter to move slow-moving merchandise.