Nordstrom Inc. on Thursday afternoon reported earnings per diluted share for the second quarter ended August 4 of 95 cents, exceeding company expectations and beating Wall Street estimates by 11 cents.
The strong EPS showing reflected top-line growth across Nordstrom’s full-price and off-price businesses. Based on first-half results, the company raised its full-year earnings per diluted share expectations to $3.50 to $3.65, up from its prior outlook of $3.35 to $3.55.
Total company net sales increased 7.1 percent for the second quarter ended August 4 compared with the quarter ended July 29, 2017. This reflected a favorable shift of approximately 100 basis points primarily due to the impact of the new revenue recognition standard as it relates to the timing of the anniversary sale.
This impact is expected to fully reverse in the third quarter. Comparable sales are reported on a like-for-like basis with no impact from event shifts due to the 53-week calendar in 2017 or revenue recognition. Comparable sales increased 4 percent in the second quarter, compared with the 13-week period ended August 5, 2017.
Nordstrom’s customer strategy is centered on three strategic pillars: providing a compelling product offering, delivering outstanding services and experiences and leveraging the strength of the Nordstrom brand. During the quarter, the company continued its progress in executing its strategy and delivering on its long-term financial commitments for higher returns to shareholders:
- In executing its digital strategy, the company increased digital sales by 23 percent in the second quarter, compared with 20 percent for the same period last year. Digital sales represented 34 percent of second quarter sales, up from 29 percent a year ago.
- During the first day of its anniversary sale, Nordstrom achieved record digital demand, surpassing its previous peak by 80 percent.
- In off-price, comparable sales increased 4 percent, exceeding expectations.
- Second quarter net earnings were $162 million compared with $110 million during the same period in fiscal 2017. The increase was driven primarily by higher sales volume, a lower effective tax rate and the impact of the new revenue recognition standard as it relates to the timing of the Anniversary Sale.
- Earnings before interest and taxes (“EBIT”) were $246 million, or 6.2 percent of net sales, compared with $217 million, or 5.8 percent of net sales, during the same period in fiscal 2017. The increase in EBIT included a favorable shift of $30 million primarily due to the impact of the new revenue recognition standard as it relates to the timing of the Anniversary Sale, which is expected to fully reverse in the third quarter.
- In Full-Price, comparable sales increased 4.1 percent. The top-ranking merchandise categories were Kids’ Apparel and Beauty.
- In Off-Price, comparable sales increased 4 percent.
- Sales from Nordstrom Rewards customers represented 58 percent of second quarter sales compared with 56 percent a year ago.
- Gross profit, as a percentage of net sales, of 35 percent increased 91 basis points compared with the same period in fiscal 2017. This increase included a favorable shift of $30 million due to the impact of the new revenue recognition standard as it relates to the timing of the Anniversary Sale, which is expected to fully reverse in the third quarter. In addition, the increase was driven by higher product margins from continued regular price selling trends and leverage on occupancy expenses.
- The company ended the second quarter with a positive spread between inventory and sales growth, in-line with expectations.
- Selling, general and administrative expenses, as a percentage of net sales, of 31 percent increased 71 basis points compared with the same period in fiscal 2017, primarily due to higher supply chain expenses related to planned growth and the Anniversary Sale. The company is on track to achieve its plan for mid-single-digit growth in selling, general and administrative expenses for the year.
- During the six months ended August 4, 2018, the company repurchased 1.8 million shares of its common stock for $87 million. A total capacity of $327 million remains available under its existing share repurchase 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, closed two stores and relocated one store.