Nordstrom Inc. reported earnings in the first quarter rose 24 percent to $145 million, or 65 cents per share, from $116 million, or 52 cents, a year ago. Nordstrom’s first quarter performance was at the high end of the
company’s internal plans, reflecting continuing strength in same-store
sales across multiple merchandise categories. Comps increased 6.5 percent.
This year’s first quarter results include charges of approximately $0.04 per diluted share related to the acquisition of HauteLook, a transaction that was completed during the quarter.
Net sales in the first quarter were $2.23 billion, an increase of 12.0 percent compared with the same period in fiscal 2010.
Nordstrom net sales, which include results from the full-line and Direct businesses, increased $150 million, or 9.2 percent compared with the same period in fiscal 2010. Nordstrom same-store sales increased 7.8 percent compared with the same period in fiscal 2010. Top-performing merchandise categories included Designer, Jewelry and Men’s Apparel. The South and Midwest regions were the top-performing geographic areas for full-line stores relative to the first quarter of 2010. The Direct channel continued to show strong sales growth, outpacing the overall Nordstrom increase.
Nordstrom Rack net sales increased $76 million, or 19.5 percent compared with the same period in fiscal 2010, with same-store sales up 1.2 percent.
Gross profit, as a percentage of net sales, increased approximately 30 basis points compared with last year’s first quarter. The improvement was driven by the ability to leverage buying and occupancy expenses during the quarter. The company ended the quarter with sales per square foot up 7.3 percent and inventory per square foot up 3.7 percent compared with the first quarter of 2010.
Retail selling, general and administrative expenses increased $78 million compared with last year’s first quarter. The increase is primarily due to higher sales volume, new stores and HauteLook operating expenses and purchase accounting charges.
The Credit segment continued to improve. Customer payment rates increased, resulting in improved delinquency and write-off trends, and a corresponding decrease in finance charge revenue. Annualized net write-offs were 7.0 percent of average credit card receivables during the quarter, down from 11.9 percent in the first quarter of 2010. Delinquencies as a percentage of credit card receivables at the end of the first quarter were 3.3 percent, down from 4.2 percent at the end of the first quarter of 2010. As a result, the reserve for bad debt was reduced by $10 million to $135 million.
Charges associated with the HauteLook acquisition, including transaction costs, stock-based compensation expense and amortization of intangible assets, reduced diluted earnings per share for the quarter by approximately $0.04.
Earnings before interest and taxes increased $53 million to $272 million, or 11.7 percent of total revenues, from $219 million, or 10.5 percent of total revenues, in last year’s first quarter. This year’s first quarter earnings before interest and taxes included charges of approximately $10 million related to HauteLook.
FISCAL YEAR 2011 OUTLOOK
Nordstrom expects the impact of the purchase accounting charges related to the acquisition of HauteLook to be dilutive to fiscal 2011 earnings by approximately $0.20 per diluted share, including $0.04 per diluted share in the first quarter. Excluding primarily non-cash purchase accounting charges, HauteLook is expected to have breakeven earnings for fiscal year 2011.
Nordstrom is updating its outlook for fiscal 2011 to factor in its first quarter performance and the impact of HauteLook. The company expects earnings per diluted share in the range of $2.80 to $2.95. This outlook is $0.15 lower than the previous range of $2.95 to $3.10 due to the estimated impact of the HauteLook acquisition, partially offset by the impact of first quarter share repurchases.
