Nordstrom Reduces Losses in Q1
Nordstrom Inc., continuing to recover from the impact of the pandemic, reported a net loss of $116 million in the first quarter of this year compared to a loss of $521 million in the year-ago period, while sales rose 44 percent to $2.92 billion versus $2.03 billion a year ago.
Nordstrom stores were temporarily closed for about half of the 2020 first quarter due to COVID-19. Retailers in the first quarter this year have been favorably affected by the government stimulus program, and faster-than-expected rollouts of COVID-19 vaccines.
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Last quarter’s net loss included an after-tax debt refinancing charge of $64 million, and the year-ago net loss included after-tax charges of $173 million related to COVID-19.
The Seattle-based upscale retailer reported a loss before interest and taxes of $85 million in the first quarter ended May 1, primarily due to higher sales volume as well as the decrease in SG&A expense. That compares to a loss before interest and taxes of $813 million during the same period in fiscal 2020.
Sales in the first quarter decreased 13 percent from the same period in fiscal 2019, representing a sequential improvement of 720 basis points relative to the fourth quarter of fiscal 2020. The company said sales trends reflected “broad-based improvement” across Nordstrom and Nordstrom Rack, in stores and online, and across regions and merchandise categories.
During the quarter, Nordstrom expanded the rollout of its market strategy to its top 20 markets, which comprise about 75 percent of sales. The market strategy involves integrations of services and merchandise offerings across channels and banners.
“We are encouraged by sales trends both in our stores and our digital business, supported by an improving consumer environment and strong execution,” said Erik Nordstrom, chief executive officer of Nordstrom Inc. “Looking ahead to summer, we are well positioned to continue to capitalize on pent-up demand, and are further strengthening our position as we execute on our strategy to win in our most important markets, broaden the reach of Nordstrom Rack and increase our digital velocity.”
Improving sales trends were seen in occasion-based apparel, handbags, sunglasses and swimwear, while home, active, designer and beauty categories continued to perform well. The company expanded its assortment in Nordstrom and Nordstrom Rack, while reducing its inventory overage from the end of the fourth quarter of fiscal 2020 faster than expected.
“We are continuing to serve our longtime and new customers on their terms, with highly relevant and current product, more choices and better service, allowing us to deliver on our commitment to get ‘closer to you’,” said Pete Nordstrom, president and chief brand officer. “With the efforts of our incredible employees and close partnership with our vendors, we have aligned inventories with current sales trends and are energized by the momentum we’re seeing in the business and the plans we have for a strong Anniversary Sale,” which is held in the summer and often limited-time discounts on new fall merchandise.
As previously announced, Nordstrom further improved its financial position in April by redeeming $600 million of 8.75 percent secured notes and issuing lower-coupon unsecured notes due in 2024 and 2031. As a result of these transactions, the company’s bond portfolio is once again entirely unsecured, the company said. These transactions will reduce annualized interest expense by about $30 million, beginning in the second quarter of fiscal 2021.
For the Nordstrom brand, net sales increased 37 percent compared with the same period in fiscal 2020, and decreased 13 percent compared with the same period in fiscal 2019.
For the Nordstrom Rack brand, net sales increased 59 percent compared with the same period in fiscal 2020, and decreased 13 percent compared with the same period in fiscal 2019.
Digital sales increased 23 percent compared with the same period in fiscal 2020 and increased 28 percent compared with the same period in fiscal 2019. Digital sales represented 46 percent of total sales during the quarter.
Gross profit, as a percentage of net sales, of 31 percent increased about 2,000 basis points compared with the same period in fiscal 2020, primarily due to lower markdowns and leverage from higher net sales volume. Gross profit, as a percentage of net sales, decreased 260 basis points compared with the same period in fiscal 2019 as a result of deleverage on lower sales and lower merchandise margins, partially offset by permanent reductions in buying and occupancy costs.
For all of 2021, revenue, including retail sales and credit card revenues, is expected to grow more than 25 percent. Earnings before interest and taxes margin is expected to be approximately 3 percent of sales.
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