Home Business Nordstrom (JWN) Earnings in Q4 2023

Nordstrom (JWN) Earnings in Q4 2023

by SuperiorInvest

Shoppers leave the Nordstrom at the Westfield Topanga shopping center in Los Angeles on August 14, 2023.

Cristina House | Los Angeles Times | fake images

Nordstrom's Christmas quarter sales beat Wall Street expectations on Tuesday, but the retailer offered a dovish outlook for next year and shares fell about 10% in extended trading.

The Seattle-based company said it plans to open new Nordstrom Rack stores and drive higher sales online and in stores over the next year. However, it said full-year revenue, including retail sales and credit cards, will range between a 2% decline and a 1% increase compared to the previous year. That forecast includes a more than 1% impact from having one less week in the fiscal year.

Nordstrom said it expects earnings per share of between $1.65 and $2.05 for the full year. That would be higher than its most recent fiscal year, which saw per-share earnings of $1.51, the retailer said Tuesday.

Here's what the department store operator reported compared to what Wall Street expected, according to a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: 96 cents adjusted vs. 88 cents expected
  • Revenue: $4.42 billion vs. $4.39 billion expected

Like other retailers, Nordstrom has felt pressure for consumers to become more selective and price conscious as they deal with inflation and higher interest rates. It has also struggled with company-specific issues, such as lagging sales at its off-price retailer, Nordstrom Rack, and too much incorrect inventory, which led to higher levels of markdowns.

In the fiscal quarter ending Feb. 3, Nordstrom's quarterly revenue rose about 2% from $4.32 billion in the year-earlier period. It attributed approximately $190 million of those sales to having 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 associated with the relocation of the company's fulfillment center, as well as other adjustments, earnings per share were 96 cents.

Net sales of the company's eponymous brand decreased 3% in the fourth quarter compared to the same period a year ago. That includes a 4.1% increase over the additional week of the fiscal year.

The company's liquidation of its Canadian business affected sales, causing net sales to fall 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 discount brand, had the best performance in the holiday quarter. Its net sales increased 14.6%, including a 5.8% increase due to the extra week of the year.

In the fourth quarter, more shoppers visited Nordstrom Rack's website and made purchases when they did, CEO Erik Nordstrom said on the company's earnings call.

The discount chain grew, even without the boost from new store openings, and the brand's comparable sales increased in the single digits, he said.

Nordstrom opened 19 new Nordstrom Rack stores during the fiscal year, for a total of 258 stores. Including its 93 Nordstrom flagship stores, the company ended the year with 359 total stores, just one more than at the end of the previous 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 Rack's retained customers migrate to Nordstrom 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 stores last year were our large urban flagship stores,” he said. “In particular, New York has shown really strong growth.”

Shopping trends

Women's apparel, beauty and active categories had the largest year-over-year growth in the fourth quarter. Some popular purchases included running shoes from On Running and Hoka, and clothing from Vuori, Erik Nordstrom said. Shoppers also snapped up fragrances and clothing from fashion brands such as Vince and Cinq in September during the Christmas quarter, he said.

Online sales fell 1.7% in the fourth quarter compared to the same period a year earlier. E-commerce accounted for 38% of total sales during the quarter, up from 40% in the same period last year, and 36% for the fiscal year, up from 38% in fiscal 2022.

Store traffic “continues to be weak,” although traffic at Nordstrom stores improved sequentially throughout the year, Erik Nordstrom said on the earnings conference call. He said website traffic also remains low. However, he said average order value is 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 entered the holiday quarter with less inventory, leading to fewer markdowns and fresher merchandise, Erik Nordstrom said.

Next year, he said the retailer will focus on driving sales growth at its namesake brand, operating more efficiently and building on momentum at Nordstrom Rack.

In April, it will launch an online marketplace on Nordstrom's website to expand its product assortment with inventory owned and sold by third-party vendors. Marketplaces tend to be more profitable for retailers because the company doesn't take on the risk of buying inventory that customers don't like and is stuck marking it down.

Nordstrom will also personalize the online experience so shoppers are directed to items they might like, he said. Online and in stores, 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. That has underperformed earnings by about 25% of the S&P 500. Nordstrom shares closed Tuesday at $20.90, bringing the company's market value to about $3.4 billion.

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