Nordstrom Inc. reported earnings of $87 million, or 51 cents per share, in the first quarter ended May 5, compared with $63 million, or 37 cents a share, in the same quarter in fiscal 2017.
Sales increased 5.8 percent to $3.5 billion compared with the quarter ended April 29, 2017. This reflected an increase of approximately 250 basis points primarily due to the shift of a Nordstrom Rewards loyalty event into the first quarter relative to the second quarter last year. Comparable sales for the first quarter increased 0.6 percent, compared with the 13-week period ended May 6, 2017.
The company continues to invest in new market opportunities and digital capabilities to drive customer engagement and market share gains. During the quarter, the company made the following achievements in executing its growth plans:
- The company reached a significant milestone in its history with the opening of the Nordstrom Men’s Store in New York City.
- The company expanded its presence in Canada with the introduction of Nordstrom Rack, opening three stores in the Toronto and Calgary markets.
- In executing its digital strategy, the company increased sales enabled through digital capabilities by 18 percent in the first quarter, compared with the same period in 2017. Digitally enabled sales represented 29 percent of first quarter sales, up from 25 percent a year ago.
- Sales from Nordstrom Rewards customers represented 53 percent of first quarter sales, compared with 47 percent a year ago.
First Quarter Summary
- First quarter net earnings were $87 million compared with $63 million during the same period in fiscal 2017. Results in 2017 included an interest expense charge of $18 million related to a debt refinancing.
- Earnings before interest and taxes were $153 million, or 4.4 percent of net sales, compared with $151 million, or 4.6 percent of net sales, during the same period in fiscal 2017.
- In full-price, which consists of Nordstrom U.S. full-line stores, Nordstrom.com, the Canadian operation, Trunk Club, Jeffrey and Nordstrom Local, comparable sales increased 0.7 percent. The top-ranking merchandise categories were Kids’ Apparel and Men’s Apparel.
- In Off-price, which consists of Nordstrom U.S. Rack stores, Nordstromrack.com/HauteLook and Last Chance clearance stores, comparable sales increased 0.4 percent.
- Gross profit, as a percentage of net sales, of 34.1 percent decreased 21 basis points compared with the same period in fiscal 2017. This reflected higher occupancy expenses related to U.S. and Canada Rack openings in addition to planned pre-opening expenses associated with the Nordstrom Men’s Store NYC.
- The company ended the first quarter in a good inventory position with net sales growth exceeding a decline in inventory.
- Selling, general and administrative expenses, as a percentage of net sales, of 32.3 percent increased 32 basis points compared with the same period in fiscal 2017, primarily due to planned pre-opening expenses associated with the Nordstrom Men’s Store NYC. The company’s rate performance, reflected an improvement relative to recent historical trends driven by productivity gains in technology, supply chain and marketing.
- During the quarter, the company repurchased 0.3 million shares of its common stock for $13 million. A total capacity of $401 million remains available under its existing share repurchase board authorization. The actual timing, price, manner and amounts of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission (“SEC”) rules.
To date in fiscal 2018, the company opened eight stores and closed one store.
Fiscal Year 2018 Outlook
The company’s updated annual outlook expectations incorporated the following assumptions:
- The shift in the anniversary sale event into the second quarter relative to the second and third quarters in 2017 and the adoption of the new revenue recognition guidance is expected to impact total sales percentage by an increase of approximately 150 basis points in the second quarter and a decrease of approximately 150 basis points in the third quarter.
- Credit card revenues growth in the mid-teens range.