Nordstrom Beats Expectations, Cites Progress in Improving Operations
Nordstrom Inc., impacted by declining revenues and charges associated with the withdrawal from Canada, reported a net loss of $205 million, or $1.27 per diluted share compared to a profit of $20 million, or $0.13 a share, in the year-ago period.
However, excluding charges related to the wind down in Canada, the company reported adjusted earnings per share of $0.07.
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For the first quarter ended April 29, the Seattle-based retailer recorded $309 million of estimated pre-tax charges related to the wind-down of Canadian operations, consistent with its previously estimated range of $300 million to $350 million. The first quarter 2023 results include Canadian operations through March 2, when it discontinued support for Nordstrom Canada. The company is early in the wind-down process and the entire shutdown of Nordstrom’s Canada operations — six department stores, seven Rack units and e-commerce — should be completed this month.
Nordstrom’s loss before interest and tax was $259 million in the first quarter of 2023, compared with EBIT of $73 million during the same period in fiscal 2022. Adjusted EBIT of $50 million in the first quarter of 2023 excluded one-time charges of $309 million related to the wind-down of Canadian operations. Adjusted EBIT of $32 million in the first quarter of 2022 excluded a $51 million gain on the sale of the company’s interest in a corporate office building and a $10 million impairment charge related to costs associated with the wind-down of Trunk Club.
Net sales decreased 11.6 percent versus the same period in fiscal 2022, including a 175 basis point negative impact from the wind-down of Canadian operations, and gross merchandise value decreased 11.9 percent.
By division, Nordstrom banner net sales decreased 11.4 percent and GMV decreased 11.8 percent. Net sales for Nordstrom Rack fell 11.9 percent.
“We are pleased with the progress we’re making against the key priorities we laid out for 2023 as we continue to enhance our overall customer experience, improve Nordstrom Rack performance, increase inventory productivity and optimize our supply chain operations,” Erik Nordstrom, chief executive officer, said in a statement Wednesday. “We’re encouraged by our momentum, especially given the uncertain macroeconomic environment. We remain focused on executing with agility and delivering long-term value to our shareholders.”
“Our focus on these key priorities allows us to better serve our customers through great brands at great prices at the Rack and more product newness and better flow across our banners, while also positioning us for more profitable growth,” added Pete Nordstrom, president and chief brand officer. “We’re grateful to our team for their hard work and focus, and we’re excited to serve our customers with new and fresh selections from the best brands at our upcoming Anniversary Sale.”
In after market trading, Nordstrom’s share price rose 7 percent, or $1.08, to $16.38, after being down 6 percent at market close. Investors apparently reacted favorably to the commentary on improving operations and the adjusted earnings per share of 7 cents last quarter compared to a 6-cent loss per share a year ago.
Most categories in the U.S. were down in the first quarter versus 2022, which benefited from strong pent-up demand for a return to occasions after the pandemic. Active was the strongest category, while beauty and men’s apparel performed above average.
In a conference call with retail analysts and investors, Pete Nordstrom said designer was the toughest category. “Trends decelerated after strong demand during the pandemic, but designer sales remain above pre-pandemic levels. They’re normalizing after a big run-up in the last two years. The high-end customer is resilient but also cautious. Men’s dress wear was the number-one volume driver.”
Erik Nordstrom in the call said “Customer demand continues to be pressured under the current economic backdrop.” He cited the three key priorities for attaining improved profitability — the first, improving Rack where the penetration of top-performing strategic brands is growing and the off-price division continues to open stores. Twenty units are being opened this year.
The second priority cited was “managing with leaner and more current inventories” for improved sell-through which results in gross margin increases.
The third priority is improving the supply chain via continuing reduced transportation costs and shorter delivery times to customers.
Digital sales decreased 17.4 percent compared with the same period in fiscal 2022. The company reported that eliminating store fulfillment for Nordstrom Rack digital orders during the third quarter of fiscal 2022 and sunsetting Trunk Club earlier in fiscal 2022 negatively impacted first-quarter digital sales by about 800 basis points. Digital sales represented 36 percent of total sales during the quarter.
Ending inventory decreased 7.8 percent compared with the same period in fiscal 2022, versus an 11.6 percent decrease in sales.
For this year, Nordstrom expects revenues to decline, including retail sales and credit card revenues, by 4 to 6 percent versus fiscal 2022, including an about 250 basis point negative impact from the wind-down of Canadian operations and an approximately 130 basis point positive impact from the 53rd week.
At the end of the quarter, Nordstrom Inc. has $1.4 billion in available liquidity and what executives described as a strong balance sheet.
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