Toronto Star March 21, 2023.
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Nordstrom
on Thursday surpassed Wall Street’s quarterly sales and earnings expectations, as it showed signs of progress in turning around its lagging business.Yet despite a sizable beat, the retailer stuck with its previous full-year outlook — signaling caution about the coming months.
The company expects revenue to fall 4% to 6% and adjusted earnings per share to range between $1.80 and $2.20 for the fiscal year, excluding the impact of winding down its stores and online business in Canada. Nordstrom’s results, while better than expected, reflect the company’s challenges. The upscale department store operator’s sales in the second quarter of fiscal year 2010 were still below the pre-pandemic level. Nordstrom missed out on Covid’s stimulus-driven spending spree that was beneficial to other retailers. “We remain confident in our ability to deliver on these priorities, all while keeping the customer at the center of everything we do,” he said in a news release.
“Looking ahead, we remain confident in our ability to deliver on these priorities, all while keeping the customer at the center of everything we do,” he said in a news release.
Shares fell over 4% in extended trading Thursday, after initially rising.
Here’s how Nordstrom did in the quarter ended July 29 compared with what analysts were anticipating, based on Refinitiv estimates:
Earnings per share: 84 cents vs. 44 cents expected
Revenue: $3.77 billion vs. $3.65 billion expected
Nordstrom’s net income in the quarter rose to $137 million, or 84 cents per share, from $126 million, or 77 cents a share, a year earlier.
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Net sales decreased 8.3% compared with a year ago.
Digital sales tumbled by nearly 13% compared with the year-ago period. The company blamed the drop in part on the wind-down of Trunk Club, a personal-styling service it acquired, ending store fulfillment for Nordstrom Rack’s digital orders and the shifted anniversary sale timing. Finance chief Cathy Smith said on a call with investors that sales trends improved each month of the quarter, when excluding the impact of the anniversary sale’s timing change. Erik Nordstrom stated that Rack sales were on a “steady upward trajectory” throughout the year. He said as Nordstrom has added more brands that customers like, trends have improved.
“The overarching strategy is to put more of those dollars into these strategic brands,” he said on the investor call.
Still, customer traffic across both banners, Nordstrom and Nordstrom Rack, has been weaker, he said. He said that although sales were down during the period, Nordstrom experienced growth in certain categories. Sales of active and beauty merchandise grew by low single digits, driven by sales of sneakers from New Balance, Nike and On Running, and from expanded merchandise from makeup brands like MAC and Clinique at Nordstrom Rack, Chief Brand Officer Pete Nordstrom said on a call with investors.
Kids’ and men’s apparel also performed better than average, he said.
The anniversary sale also helped draw the company’s most loyal shoppers to Nordstrom’s website and stores, he said.
On the other hand, designer merchandise — typically associated with higher price points — remained under pressure, he said. Nordstrom has reduced its inventory in that category to match lower demand, he said. Inventory, an area of weakness for Nordstrom in the previous year, was in better shape. Inventory was 17.5% lower at the end of this quarter compared to the same period of 2022. On the call, Erik Nordstrom acknowledged that thefts were occurring in some of the company stores. The CEO of the retailer said that what happened in that store was “disturbing” to everyone and that theft losses are at “historical highs.” But, he added, theft is factored into the company’s guidance and is not higher than expected.
Shares of Nordstrom are up about 4% so far this year, but trail behind the approximately 14% gains of the S&P 500. Stocks of Nordstrom closed Thursday at $16.82, which brought its market value up to $2.72 Billion.