Shoppers exit Nordstrom at the Westfield Topanga mall in Los Angeles on August 14, 2023.
Christina House | Los Angeles Times | Getty Images
Nordstrom’s Holiday quarter sales beat Wall Street expectations on Tuesday, but the retailer gave a muted outlook for next year and shares fell about 10% in extended trading.
The Seattle-based company plans to open new Nordstrom Rack stores next year and increase online and in-store sales. Still, it said full-year sales, including retail sales and credit cards, would range from a decline of 2% to an increase of 1% compared to last year. That forecast includes a decline of more than 1% with one less week in the fiscal year.
Nordstrom expects full-year earnings per share between $1.65 and $2.05. That would be higher than last fiscal year, when earnings per share were $1.51, the retailer said Tuesday.
Here’s what the department store operator reported compared to Wall Street’s expectations, based on a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: 96 cents adjusted versus 88 cents expected
- Revenue: $4.42 billion vs. expected $4.39 billion
Similar to other retailers, Nordstrom is feeling the pressure as consumers become pickier and more price-conscious while battling inflation and higher interest rates. The company also faced company-specific issues, such as declining sales at its off-price retailer Nordstrom Rack and excess inventory levels that led to higher markdowns.
In the fiscal quarter that ended Feb. 3, Nordstrom’s quarterly sales rose about 2% from $4.32 billion in the year-ago period. They attributed about $190 million of that revenue to an extra week in the fiscal year.
Nordstrom’s net income rose to $134 million, or 82 cents per share, from $119 million, or 74 cents per share, a year earlier. Excluding a charge related to the relocation of the company’s logistics center and other adjustments, earnings per share were 96 cents.
Net sales for the company’s namesake banner fell 3% in the fourth quarter compared to the same period last year. This includes a 4.1% increase from the additional week of the fiscal year.
The company’s closure of its Canadian operations impacted sales, resulting in a net sales decline of more than 3%. The company announced a year ago that it would close its stores and online operations in Canada.
Rack results
Nordstrom Rack, the company’s off-price brand, had the strongest performance in the holiday quarter. Net sales increased 14.6%, including a 5.8% increase from the extra week in the year.
More shoppers visited Nordstrom Rack’s website and made purchases in the fourth quarter, CEO Erik Nordstrom said on the company’s earnings call.
The off-price chain grew even excluding the boost from new store openings, with the banner’s comparable sales increasing in the high single digits, he said.
Nordstrom opened 19 new Nordstrom Rack stores during the fiscal year, totaling 258 stores. Including its 93 flagship Nordstrom locations, the company ended the year with a total of 359 stores, just one more than at the end of the same period last year.
The retailer plans to open 22 new Nordstrom Rack stores in 2024.
On the earnings call, Erik Nordstrom said the chain is “a growth engine for our company” and Nordstrom’s “largest source of new customer acquisition.”
He said about a quarter of existing Rack customers switch to the Nordstrom banner within four years.
The company did not announce plans to open new stores under its flagship banner, but Erik Nordstrom said those stores are an important part of the company’s business.
“Some of our fastest-growing businesses last year were our large urban flagship stores,” he said. “New York in particular has shown really strong growth.”
Shopping trends
The women’s clothing, beauty and active categories experienced the strongest year-over-year growth in the fourth quarter. Popular purchases included athletic shoes from On Running and Hoka and apparel from Vuori, Erik Nordstrom said. Shoppers also bought fragrances and clothing from fashion brands such as Vince and Cinq a Sept during the holiday quarter, he said.
Online sales fell 1.7% in the fourth quarter compared to the same period last year. E-commerce accounted for 38% of total sales in the quarter, down from 40% in the year-ago period, and 36% in fiscal year, down from 38% in fiscal 2022.
Store traffic “continues to be somewhat weak,” although traffic at Nordstrom stores improved sequentially throughout the year, Erik Nordstrom said on the earnings call. He said website traffic also remains weak. Still, he said average order values are increasing both online and in stores.
Inventory at the end of the quarter was down 2.7% compared to the same period last year. The company also started the holiday quarter with less inventory, resulting in fewer markdowns and fresher merchandise, Erik Nordstrom said.
He said the retailer will focus in the coming year on driving sales growth at its namesake company, operating more efficiently and building on momentum at Nordstrom Rack.
In April, the company will launch an online marketplace on Nordstrom’s website to expand its inventory with inventory owned and sold by third-party retailers. Marketplaces tend to be more profitable for retailers because the company doesn’t take the risk of buying inventory that customers may not like and then discounting it.
Nordstrom will also personalize the online experience for shoppers to direct them to items they might like, he said. Online and in-store, beauty will play a prominent role in driving sales growth, he said.
As of Tuesday’s close, Nordstrom shares were up about 6% over the past year. This means that the S&P 500’s approximately 25% gains fell short of expectations. Nordstrom shares closed at $20.90 on Tuesday, bringing the company’s market value to about $3.4 billion.
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2024-03-05 23:11:38
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