Lower Profits Expected by Nordstrom : Retailing: Sales will be up about 15% for the year. Analysts predicted that the already-depressed shares will fall further.

Nordstrom, hit surprisingly hard by sharp price cutting and sluggish sales during the Christmas shopping season, disclosed Thursday that it expects to report lower profits for the fourth quarter and the fiscal year that ended Jan. 31.

The announcement came after stock trading closed, prompting analysts to predict that the already-depressed shares of the department store company will fall further in heavy trading today. Nordstrom’s stock, which traded as high as $38 in December, dropped $1.25 Thursday to close at $32.75 in over-the-counter trading.

“We had been expecting that it (the company’s earnings report) would be bad, but we didn’t realize it would be this bad,” said Thomas H. Tashjian, an analyst with Seidler Amdec Securities in Los Angeles.

Nordstrom said its sales, however, would be up about 12% for the fourth quarter and 15% for the year. Final figures are expected to be released in 10 days. A year ago, the Seattle-based company posted profit of $47.5 million on sales of $765.1 million for the fourth quarter, along with profit of $123.3 million on sales of $2.33 billion for the year.

The disappointing results apparently stem largely from the Nordstrom stores’ overly optimistic buying for the critical holiday season. “After the end of the Christmas sales, they were still stuck with bloated inventories,” Tashjian said.

Meanwhile, the steep markdowns that retailers offered to move merchandise in December and January squeezed profits at Nordstrom and other stores. One of the chains that enjoyed a relatively strong holiday season, J.C. Penney Co., surprised analysts Thursday by disclosing that its gross profit margins narrowed during its fourth quarter, Tashjian said.

Nordstrom also said that a substantial increase in shrinkage--a retailing term including losses from theft as well as bookkeeping discrepancies--contributed to the depressed earnings. John A. Goesling, Nordstrom’s chief financial officer, said company officials “really don’t know” what caused the shrinkage.

Still, the news does not mean that Nordstrom will retreat from its East Coast expansion plans, said Sarah A. Stack, an analyst with Los Angeles-based Bateman Eichler, Hill Richards. “There are snags like this once in a while, but they don’t cloud the picture” for expansion, she said.