Nordstrom reported active was its strongest category in the third quarter, climbing double-digits. On an analyst call, Pete Nordstrom, president, said, “Active sales growth was led by footwear, driven by New Balance, Hoka, and On Running, and in apparel, Vuori.”

Other categories called out for strength included beauty and accessories, up by low single-digits versus 2022.

Companywide, net sales decreased 6.8 percent versus the same period in fiscal 2022 to $3.32 billion, falling short of Wall Street’s consensus target of $3.39 billion.

Third-quarter net sales include a 270 basis point negative impact from the wind-down of Canadian operations. Anniversary Sale timing, with one week shifting from the second quarter to the third quarter, had a positive impact of approximately 200 basis points on net sales compared with 2022. Excluding the impacts of the Canadian wind-down and Anniversary Sale timing shift, net sales would have been down approximately 6 percent. During the quarter, Nordstrom banner net sales decreased 9.4 percent and GMV decreased 9.8 percent. Net sales for Nordstrom Rack decreased 1.8 percent.

For the Nordstrom banner, sales decreased 9.4 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 410 basis points. The timing shift of the Anniversary Sale had a positive impact on Nordstrom banner net sales of approximately 300 basis points compared with the third quarter of 2022.

For the Nordstrom Rack banner, sales decreased 1.8 percent 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 third-quarter Rack banner sales by approximately 100 basis points.

Digital sales decreased 11.3 percent. Eliminating store fulfillment for Nordstrom Rack digital orders during the third quarter of fiscal 2022 negatively impacted third-quarter digital sales by approximately 100 basis points. The timing shift of the Anniversary Sale had a positive impact on company digital sales of approximately 400 basis points year over year. Digital sales represented 34 percent of total sales during the quarter.

Gross profit, as a percentage of net sales, of 35.0 percent increased 180 basis points compared with the same period in fiscal 2022 primarily due to lower markdowns, increased inventory productivity and lower buying and occupancy costs, partially offset by deleverage on lower sales.

SG&A expenses, as a percentage of net sales, of 36.3 percent decreased 5 basis points compared with the same period in fiscal 2022. SG&A expenses increased 200 basis points when compared with adjusted SG&A expenses in fiscal 2022, primarily due to deleverage from lower sales and higher labor costs, partially offset by improvements in variable costs from supply chain efficiency initiatives. Adjusted SG&A expenses, as a percentage of net sales, of 34.3 percent in the the year-ago quarter excluded a $70 million supply chain technology and related asset impairment charge.

Net earnings were $67 million, or 41 cents a share, against a loss of $20 million, or 13 cents, a year ago. Excluding a favorable true-up related to the wind-down of Canadian operations, adjusted EPS was 25 cents a share against of 20 cents a year ago. Year-ago adjusted earnings excludes supply chain impairment charges.  Adjusted EPS topped Wall Street’s consensus estimate of 13 cents.

EBIT was $102 million in the third quarter of, compared with $3 million during the same period in fiscal 2022. Adjusted EBIT improved 5.5 percent to of $77 million from $73 million a year ago.

Ending inventory decreased 8.8 percent compared with the same period in fiscal 2022, versus a 6.8 percent decrease in sales.

Fiscal Year 2023 Outlook
The company updated its financial outlook for fiscal 2023, which includes a 53rd week and reflects the true-up related to the wind-down of Canadian operations and related tax impacts recorded in the third quarter:

  • Revenue decline, including retail sales and credit card revenues, of 4.0 to 6.0 percent versus fiscal 2022, including an approximately 250 basis point negative impact from the wind-down of Canadian operations and an approximately 130 basis point positive impact from the 53rd week;
  • EBIT margin (including the negative impact of charges related to the wind-down of Canadian operations) of 1.8 to 2.1 percent of sales;
  • Adjusted EBIT margin (excluding charges related to the wind-down of Canadian operations) of 3.8 to 4.1 percent of sales
  • Income tax rate of approximately 21 percent, including an approximately 800 basis point favorable impact primarily from the one-time Canada charges;
  • EPS (including the negative impact of charges related to the wind-down of Canadian operations) of $0.74 to $0.94, excluding the impact of share repurchase activity, if any; and
  • Adjusted EPS (excluding charges related to the wind-down of Canadian operations) of $1.90 to $2.10, excluding the impact of share repurchase activity, if any.

Photo courtesy Nordstrom