8-K: Nordstrom Reports Positive Third Quarter Sales Growth, Updates Fiscal 2024 Outlook

Nordstrom's third quarter saw positive sales growth across both its Nordstrom and Nordstrom Rack banners, leading to margin expansion and an updated fiscal year 2024 outlook.

Summary

• Nordstrom reported a net earnings of $46 million, or $0.27 per diluted share, for the third quarter of 2024.
• Adjusted earnings per share were $0.33, excluding a charge related to accelerated technology depreciation.
• Net sales increased by 4.6 percent compared to the same period in 2023, with total company comparable sales up by 4.0 percent.
• Gross merchandise value (GMV) increased by 5.3 percent.
• The timing of the Anniversary Sale had a negative impact of approximately 100 basis points on net sales.
• Nordstrom banner net sales increased by 1.3 percent, while Nordstrom Rack net sales increased by 10.6 percent.
• Digital sales grew by 6.4 percent and represented 34 percent of total sales.
• Gross profit margin increased by 60 basis points to 35.6 percent.
• The company has opened 23 new stores in fiscal 2024 and plans to open more in 2025 and 2026.
• Nordstrom updated its fiscal 2024 outlook, projecting revenue growth of flat to 1.0 percent and comparable sales growth of 1.0 to 2.0 percent.
• The company expects an EBIT margin of 3.0 to 3.4 percent and adjusted EBIT margin of 3.6 to 4.0 percent for fiscal 2024.
• The company ended the third quarter with $1.2 billion in available liquidity, including $397 million in cash.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with strong sales growth and margin expansion, but there are some concerns about the external environment and a recent slowdown in sales. The company is taking a cautious approach to its outlook, which is prudent.

Positives

• Both Nordstrom and Nordstrom Rack banners experienced positive sales growth.
• The company saw an increase in customer base and customer trips.
• Gross profit margin expanded due to strong regular price sales.
• Digital sales continued to show strong growth.
• The company is successfully expanding its Nordstrom Rack store footprint.
• The company has a solid liquidity position with $1.2 billion available.
• The company's strategic focus on curating a compelling brand assortment is resonating with customers.
• The company is well-positioned for the holiday season with inventory flow, staffing, and shipping capacity.

Negatives

• The timing of the Anniversary Sale negatively impacted net sales by approximately 100 basis points.
• Ending inventory increased by 5.9 percent, slightly higher than the 4.6 percent increase in sales.
• Selling, general and administrative expenses increased by 25 basis points due to higher labor costs and a technology depreciation charge.
• EBIT was $83 million, down from $102 million in the same period last year, although adjusted EBIT was higher.
• There was a noticeable decline in sales trends towards the end of October.
• Credit card revenues as a percentage of total revenue declined modestly due to higher losses.

Risks

• The external environment remains uncertain, which could impact future sales.
• The company experienced a slowdown in sales towards the end of October.
• The holiday season is shorter by 5 days this year, which could affect sales.
• The 53rd week in 2023 benefited fourth quarter net sales by 460 basis points, creating a headwind for 2024.
• The company is facing higher labor costs and technology depreciation charges.
• The company's credit card revenues are experiencing higher losses.

Future Outlook

Nordstrom updated its fiscal 2024 outlook, projecting revenue growth of flat to 1.0 percent and comparable sales growth of 1.0 to 2.0 percent. The company expects an EBIT margin of 3.0 to 3.4 percent and adjusted EBIT margin of 3.6 to 4.0 percent for fiscal 2024. Full-year EPS is expected to be $1.40 to $1.70, or $1.75 to $2.05 adjusted for certain items.

Management Comments

• Erik Nordstrom stated that the company's efforts to enhance the customer experience continued to resonate, enabling growth in net and comparable sales.
• Pete Nordstrom highlighted the company's focus on curating a compelling brand assortment that is resonating with customers.
• Cathy Smith noted that the company delivered solid results with growth in net sales and EBIT as well as margin expansion.

Industry Context

Nordstrom's results reflect a broader trend in the retail industry where companies are focusing on enhancing customer experience, optimizing operations, and expanding digital presence. The company's performance in both its full-price and off-price banners indicates a diversified approach to capturing different customer segments. The company's focus on inventory management and supply chain optimization is also in line with industry best practices.

Comparison to Industry Standards

• Nordstrom's 4.6% net sales growth is a positive result compared to some department stores that have struggled with flat or declining sales.
• The 10.6% growth in Nordstrom Rack net sales is particularly strong, indicating the success of the off-price strategy, which is a trend seen in other retailers like TJX Companies (TJ Maxx, Marshalls).
• The 6.4% growth in digital sales is solid, but some pure-play online retailers may be experiencing higher growth rates.
• The company's gross margin of 35.6% is within the range of other department stores, but may be lower than some luxury retailers.
• Nordstrom's focus on inventory management and supply chain optimization is similar to strategies employed by other successful retailers like Target and Walmart.
• The company's adjusted EBIT margin of 3.6 to 4.0% is a key metric to watch, as it indicates the profitability of the core business, and is comparable to other department stores.

Stakeholder Impact

• Shareholders will benefit from the positive sales growth and margin expansion.
• Employees will be impacted by the company's focus on customer service and operational optimization.
• Customers will benefit from the enhanced shopping experience and expanded merchandise selection.
• Suppliers will be impacted by the company's inventory management and supply chain optimization.
• Creditors will be impacted by the company's solid liquidity position.

Next Steps

• The company will focus on executing an exceptional holiday shopping experience.
• The company will continue to improve its shopping experience.
• The company will continue to expand its Nordstrom Rack store footprint.
• The company will continue to scale its Marketplace business.
• The company will continue to optimize its supply chain.

Key Dates

Keywords

Nordstrom, Nordstrom Rack, Retail, Sales Growth, EBIT, Digital Sales, Gross Margin, Earnings Per Share, Inventory, Holiday Season