Nordstrom (JWN) Q1 2023 Earnings

Shoppers enter a Nordstrom department store in Austin, Texas on March 3, 2023.

Brandon Bell | Getty Images

north currentFiscal first quarter sales on Wednesday beat Wall Street expectations, despite the retailer reporting a decline in spending and forecasting lower sales in the coming months.

The upscale department store also confirmed its outlook for the full year. Nordstrom expects fiscal year sales to decline 4% to 6% and adjusted earnings per share to be between $1.80 and $2.20, excluding the impact of closing its stores and online business in Canada.

But despite declining sales, Nordstrom highlighted its progress in managing inventory, cutting costs, and attracting buyers, particularly for its off-price brand, Nordstrom Rack. Sales for both brands, but most notably Nordstrom Rack, improved in April after a “decent” start in February and a subsequent decline in March, the company said in a conference call. That momentum continued into May for both banners, but most of the strength came from Nordstrom Rack, the company said.

“We are encouraged by our momentum, particularly given the uncertain macroeconomic environment,” CEO Erik Nordstrom said in the company’s earnings release.

The company’s shares are up about 7% in after-hours trading.

Here’s what the company reported for the three-month period ended April 29, compared to analysts’ expectations based on Refinitiv Estimates:

  • Earnings per share: Adjusted 7 cents versus an expected loss of 8 cents per share
  • Revenue: $3.18 billion versus $3.12 billion expected

For the fiscal first quarter, Nordstrom’s net loss was $205 million, or $1.27 a share, compared to net income of $20 million, or 13 cents a share, in the year-ago period.

Excluding costs related to closing its Canadian operations, Nordstrom’s adjusted earnings per share were 7 cents.

Nordstrom is looking for growth after struggling with flat sales and largely missing out on the stimulus-driven spending boom that has benefited other retailers during the Covid pandemic. For the most recent fiscal year ended January, the company’s total revenue was $15.5 billion. The number was flat in comparison the total revenue that the company reported in the fiscal year that ended just before the pandemic began.

The declining sales caught the interest and attention of activist investor Ryan Cohen, founder of Tough and chairman of GameStopwho bought a stake in the company earlier this year.

Nordstrom’s revenue continued to decline in the most recent three-month period. The company’s total revenue, including credit card sales, fell about 11% from $3.57 billion in the year-ago quarter, but beat Wall Street expectations.

Sales in most categories in the U.S. were down year over year in the first quarter, the company said in a release. Nordstrom attributed this in part to difficult comparisons. In the same period last year, shoppers flocked to stores to refresh designer shoes, dresses and wardrobes to attend weddings, reunions and other social gatherings as the world reopened after the pandemic.

Net sales at Nordstrom’s eponymous stores declined 11.4% year over year, while Nordstrom Rack net sales declined 11.9%.

Activewear was the best performer for Nordstrom in the first quarter. Beauty and menswear also outperformed, the company said.

The company noted that it sees no sign of customers giving up and that spending per trip has increased as it stays on track with promotions.

Still, even high-end customers are considered “cautious” in the face of a deteriorating macroeconomic environment, a trend Nordstrom has seen across the board.

Nordstrom joined cabbage And gap when reporting a surprise win and improved margins in the fiscal first quarter. Nordstrom and Gap reported earnings on an adjusted basis. All three companies struggled with declining sales, accumulation of unsold inventory, higher discounts, higher freight costs and more.

Falling inventories and overhead costs could be a bright spot for Nordstrom and other retailers in the coming quarters as they face declining sales.

Nordstrom’s inventory at the end of the three-month period was down nearly 8% year over year. The company said it’s still working to improve its designer inventory, adding that excluding those items, inventory was down 11% year over year.

As the retailer seeks a turnaround, it has closed parts of its store. The company shut down personal styling service Trunk Club last year and announced the end of Canadian operations earlier this year.

Digital sales fell 17.4% year over year, due in part to the trunk club closure.

In the coming year, Nordstrom is banking on its off-price chain to fuel growth. The retailer plans to open 20 Nordstrom Rack locations this fiscal year and plans to open more over the longer term.

In an interview with CNBC, Jamie Nordstrom, chief stores officer, said the stores, which offer brand names at lower prices, are the company’s “single largest customer acquisition vehicle” and could have appeal in times of inflation.

Nordstrom’s stock is down about 5% this year, lagging the S&P 500’s 9% gain. The company’s stock closed at $15.30 on Wednesday, taking the company’s market value to $2.47 billion.

Read the full results announcement here.

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