Nordstrom Inc., benefiting from fresher brand merchandise and investments in expanding the Rack off-price division, managed to surpass Wall Street expectations on the top and bottom lines for the third quarter.
While executives underscored the strength of the business in Q3, chief executive officer Erik Nordstrom cited a slowdown in the first couple of weeks of the fourth quarter, while Cathy Smith, chief financial officer, said the external environment is “uncertain” and that the company is “prudently cautious” on its outlook for the current quarter. Those observations were in contrast to other retail executives who sounded very optimistic on the holiday season ahead and that early reads on sales were strong.
Nordstrom did report a Q3 drop in the bottom-line net to $46 million from the $67 million in net earnings a year ago, there were increases in operating profits and sales revenues during the third quarter ended Nov. 2.
Excluding a charge related to accelerated technology depreciation, the company reported adjusted earnings before interest and taxes of $97 million versus adjusted EBIT of $77 million in the year-ago period. Earnings before interest, taxes, depreciation and amortization came to $231 million compared to $205 million in the year-ago period.
The company also reported adjusted profit of 33 cents a share for the third quarter. Analysts expected 21 cents.
Net sales increased 4.6 percent to $3.35 billion versus $3.2 billion in the same period in fiscal 2023. Company comparable sales increased 4 percent. Analysts were expecting less than a 1 percent sales gain.
Gross merchandise value increased 5.3 percent. Anniversary Sale timing, with one week shifting from the third quarter to the second quarter, had a negative impact of about 100 basis points on net sales compared with 2023.
During the quarter, Nordstrom banner net sales increased 1.3 percent and comparable sales increased 4 percent. Net sales for Nordstrom Rack increased 10.6 percent and comparable sales increased 3.9 percent.
“The continued sales growth across the company and strong gross margin in the third quarter indicate our team’s focus and efforts are working,” Erik Nordstrom said in a statement. “Our customers have a lot of choices, and our results give us encouragement that we’re on the right path. Looking ahead, we’ll continue to improve our shopping experience as we strive to maintain the positive momentum we’ve worked toward all year.”
Erik Nordstrom
Patrick MacLeod/Footwear News
The Seattle-based upscale retailer indicated that in the third quarter, women’s apparel and active had double-digit growth, and shoes, men’s apparel and kids were up mid- to high-single-digits, versus 2023. Growth in women’s apparel, shoes and men’s apparel accelerated sequentially from the second quarter.
“Our third-quarter results demonstrate that our strategic focus on curating a compelling brand assortment is resonating with customers,” said Pete Nordstrom, president of Nordstrom, in his statement. “Our actions throughout this year have led to this moment, and we feel well-positioned for a successful holiday season and look forward to helping our customers celebrate the moments that matter. I’m grateful to our dedicated team for consistently delivering the high level of service our customers have come to expect from Nordstrom.”
Driving much of the revenue growth in Q3 at the Nordstrom banner were Vince and Veronica Beard in women’s apparel; On Running, Hoka, and Vuori in active, and Stuart Weitzman, Veronica Beard, and Vince in women’s shoes. Men’s apparel growth was driven by dress wear and contemporary styles.
Executive also cited enhancement to Nordstrom’s mobile app to make holiday shopping easier, including personalized product recommendations; improved search capabilities; “engaging” editorial content, and a more integrated loyalty experience.
Nordstrom raised its sales guidance for 2024. Now the forecast for revenues, including retail sales and credit card revenues, is flat to 1 percent growth versus the previous forecast for a 1 percent decline to a 1 percent gain.
The forecast for comparable sales growth was lifted to 1 to 2 percent from the previous forecast of flat to 2 percent.
The forecasts for an EBIT margin of 3 to 3.4 percent, adjusted EBIT margin of 3.6 to 4 percent of sales, and earnings per share of $1.40 to $1.70 were unchanged.
