Nordstrom Posts Q1 Loss On Double-Digit Sales Declines Across Stores And Digital

Nordstrom, Inc. reported total company net sales decreased 11.6 percent to $3.06 billion in the fiscal first quarter ended April 29 and GMV decreased 11.9 percent compared with the same period in fiscal 2022. The wind-down of Canadian operations had a negative impact on total company net sales of 175 basis points. The first quarter of 2023 included one month of sales from Canadian operations, compared with a full quarter of sales from Canadian operations in the first quarter of 2022.

For the Nordstrom banner, net sales decreased 11.4 percent to $2.03 billion and GMV decreased 11.8 percent compared with the same period in fiscal 2022. The wind-down of Canadian operations had a negative impact on Nordstrom banner net sales of 270 basis points.

For the Nordstrom Rack banner, net sales decreased 11.9 percent to $1.04 billion compared with the same period in fiscal 2022. Eliminating store fulfillment for Nordstrom Rack digital orders during the third quarter of fiscal 2022 negatively impacted first-quarter Rack banner sales by approximately 600 basis points.

Digital sales decreased 17.4 percent compared with the comparable period in fiscal 2022. Collectively, 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 approximately 800 basis points. Digital sales represented 36 percent of total sales during the quarter versus 39 percent of sales in Q1 last year.

Gross margin increased 110 basis points to 33.8 percent of sales in Q1 compared with the same period in fiscal 2022, reflecting the company’s focus on increasing inventory productivity.

Ending inventory decreased 7.8 percent to $2.24 billion at quarter-end compared with the comparable quarter-end in fiscal 2022, versus an 11.6 percent decrease in sales.

SG&A expenses, as a percentage of net sales, of 36.0 percent increased 240 basis points compared with the same period in fiscal 2022. Excluding 120 basis points from a gain on the sale of the company’s interest in a corporate office building and an impairment charge related to costs associated with the wind-down of Trunk Club in the first quarter of fiscal 2022, SG&A expenses increased 120 basis points primarily due to deleverage from lower sales, partially offset by improvements in variable costs from supply chain efficiency initiatives.

During the first quarter, the company 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 company’s first quarter 2023 results include Canadian operations through March 2, 2023, when it discontinued support for Nordstrom Canada.2 The company is early in the wind-down process and actual results may vary from estimates.

Loss before interest and tax was $259 million in the first quarter of 2023, compared with earnings before interest and tax (“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.3

Interest expense, net, of $28 million decreased from $35 million during the same period in fiscal 2022 due to higher interest income.

Income tax benefit was $82 million, or 28.6 percent of pretax loss, compared with an income tax expense of $18 million, or 46.8 percent of pretax earnings, in the same period in fiscal 2022. Excluding the approximately 22 percentage point impact of the wind-down of Canadian operations, income tax expense in the first quarter of 2023 was 50.7 percent of pretax earnings. Income tax expense in the first quarters of 2023 and 2022, respectively, each included discrete tax expense, primarily related to stock-based compensation, which increased the quarterly effective tax rates by 29.4 percentage points and 19.3 percentage points, respectively.

Nordstrom reported a first-quarter net loss of $205 million, or a loss per diluted share of $1.27, compared to net income of $20 million, or EPS of 13 cents a share in the year-ago quarter. Excluding charges related to the wind-down of Canadian operations, the company reported adjusted EPS of 7 cents a share.

The company ended the first quarter with $1.4 billion in available liquidity, including $581 million in cash and the full $800 million available on its revolving line of credit.

Photo courtesy Nordstrom