Nordstrom on Tuesday beat Wall Street's quarterly sales expectations as sales rose about 4% year-over-year as shoppers bought clothes, shoes and sportswear at both the company's namesake department store and its off-price chain.
But even though the quarter was better than expected, the Seattle-based retailer gave only a slightly rosier full-year sales forecast – taking a conservative stance as it prepares for the busiest weeks of the holiday season. The company said it now expects full-year revenue, which includes retail sales and credit card sales, to range from flat to an increase of 1%. This compares to the previous range of 1% decline to 1% growth. However, the company maintained its adjusted earnings forecast for the year, which was between $1.75 and $2.05 per share.
In a press release, CEO Erik Nordstorm said the company's results show that efforts to appeal to selective buyers are paying off. Sales of women's clothing and activewear increased double-digit year-over-year. Footwear, men's clothing and children's grew mid- to high-single digits year-over-year.
Compared to the second quarter, sales of women's clothing, footwear and men's clothing also increased quarter-on-quarter in the fiscal third quarter.
“Our customers have many options and our results confirm that we are on the right track,” he said. “Looking forward, we will continue to improve our shopping experience and strive to maintain the positive momentum we have been working towards throughout the year.”
However, on the company's earnings call, he said that Nordstrom experienced “a noticeable decline in sales trends toward the end of October.” They have factored this slowdown into their holiday expectations, he said.
Here's how Nordstrom performed compared to Wall Street's expectations in the three-month period ending Nov. 2, based on an LSEG analyst survey:
- Earnings per share: 33 cents adjusted, it was not immediately clear whether it was comparable to analysts' estimates
- Revenue: $3.46 billion versus expected $3.35 billion
Nordstrom's fiscal third-quarter net income was $46 million, or 27 cents per share, compared with $67 million, or 41 cents per share, in the year-ago period. Sales rose from $3.32 billion in the year-ago quarter.
After excluding a charge related to accelerated technology depreciation, Nordstrom reported adjusted earnings per share of 33 cents.
Comparable sales rose 4% across Nordstrom's two brands, its namesake and its off-price chain Nordstrom Rack. According to StreetAccount, this significantly exceeded analysts' expectations of a 0.7% increase in comparable sales.
Nordstrom's sales growth, while modest, is notable at a time when sales of consumer goods and the luxury category are under pressure. Retailers like Walmart, Best Buy and Target reported last week that customers remained picky and paid more attention to price when purchasing items they want and don't need.
Nordstrom's sales growth also increased despite a calendar shift with the anniversary sale. In the same quarter last year, eight sales days fell in the three-month period, but this year only one day fell in the quarter. This had a negative impact on net sales of approximately 1%.
Macy's, which postponed its full earnings, said third-quarter sales fell 2.4% and comparable sales at its owned and licensed stores and online marketplace fell 1.3%.
Nordstrom has leaned on its off-price chain Nordstrom Rack to drive both sales growth and new store locations. But in the third quarter, the two banners reported similar comparable sales – the namesake store rose 4% and Nordstrom Rack rose 3.9%.
So far this year, Nordstrom has opened 23 new Nordstrom Rack stores, in line with the company's plans to open 20 to 25 new Racks per year.
At the end of the quarter, the company launched in-store fulfillment for online orders at Nordstrom Rack in more than 100 stores nationwide, CEO Erik Nordstrom said on the company's earnings call. He said the company has also introduced a new feature that allows customers to buy online and pick them up in store at the same stores.
Digital sales rose 6.4% year-over-year, and e-commerce accounted for about a third of total sales in the quarter.
Erik Nordstrom said the company added better search and discovery features to its website and app, supporting online growth in the quarter. He said the company has also added more items priced under $100 and expanded its third-party marketplace business, which now includes over 300 sellers.
Nordstrom's latest quarterly update comes about two months after Nordstrom's founding family made a new bid to take the company private. According to a filing in September, CEO Erik Nordstrom, President Peter Nordstrom and Mexican retailer El Puerto de Liverpool sent a non-binding letter seeking to form a company that would buy the chain for $23 per share.
The company's shares have soared since Reuters reported in March that Nordstrom's founding family wanted to take the company private. As of Tuesday's close, the company's shares were up 32% so far this year, outperforming the S&P 500's 26% gain.
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