Nordstrom Cites Progress in Q2 But Lowers 2022 Forecast
Nordstrom Inc. reported solid second-quarter earnings and sales, citing a calendar switch in the Anniversary Sale and momentum from strategic initiatives.
However, executives also cited declining consumer demand beginning in late June, leading the company to revise its 2022 forecast downward. Still, the report seemed more upbeat than those reported by Target, Kohl’s and Macy’s, where inventory gluts and revised downward forecasts for 2022 overall were disclosed.
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Net earnings for the quarter ended July 30 came to $126 million, or earnings per diluted share of $0.77, versus $80 million, or $0.49 per diluted share in the year-ago period.
Earnings before interest and tax was $202 million, compared with $151 million during the same period in fiscal 2021, primarily due to higher sales, partially offset by higher markdowns and higher labor expenses. Adjusted EBIT of $210 million for the second quarter of 2022 excluded costs associated with the wind-down of Trunk Club.
Net sales in the second quarter reached $3.99 billion, a 12 percent increase from $3.57 billion in the year-ago period.
“We delivered solid results in the second quarter, with top-line growth, increased profitability and continued progress in our strategic initiatives,” Erik Nordstrom, chief executive officer of Nordstrom Inc., said in a statement. “While our quarterly results were consistent with our previous outlook, customer traffic and demand decelerated significantly beginning in late June, predominantly at Nordstrom Rack. We are adjusting our plans and taking action to navigate this dynamic in the short term, including aligning inventory and expenses to recent trends, and we remain confident in our ability to deliver on our long-term strategic and financial goals.”
Grant Hindsley
In the second quarter, men’s apparel had the strongest growth versus 2021, and shoes, women’s apparel and beauty also had double-digit growth, as customers updated their wardrobes and returned to occasions. At the Anniversary event, sales increased 5 percent.
The timing shift of the Anniversary Sale, with one day falling into the third quarter of 2022 versus roughly one week in 2021, had a positive impact on net sales of approximately 200 basis points compared with the second quarter of 2021.
“We elevated the customer experience and increased engagement during this year’s Anniversary Sale, and we’re proud of our team’s execution and dedication to customers,” said Pete Nordstrom, president and chief brand officer. “As we look to the second half of the year, we are aggressively right-sizing our inventory while investing in supply chain and merchandising capabilities that will benefit us in 2023 and beyond.”
In its revised outlook Nordstrom is now projecting 5 to 7 percent revenue growth for 2022. Previously, the Seattle-based company projected 6 to 8 percent growth.
Earning per share, excluding the impact of any share repurchase activity, is projected at $2.30 to $2.60, versus the previous forecast of $3.38 to $3.68 per share.
Adjusted EPS, excluding share repurchases, is seen at $2.30 to $2.60 versus the earlier projection for $3.20 to $3.50 per share.
For the Nordstrom banner, net sales increased 14.7 percent, improving sequentially from the first quarter versus pre-pandemic sales levels.
At Nordstrom Rack, net sales increased 6.3 percent compared with the same period in fiscal 2021, improving sequentially from the first quarter versus pre-pandemic sales levels.
Digital sales increased 6.3 percent compared with the same period in fiscal 2021. The timing shift of the Anniversary Sale had a positive impact on company digital sales of approximately 400 basis points compared with the second quarter of 2021. Digital sales represented 38 percent of total sales during the quarter.
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