Nordstrom Inc. reported a net loss of $255 million in the second quarter as sales tumbled 53 percent due to store closures tied to the pandemic. The department store operator said improved merchandise margins and overhead cost reductions of nearly 20 percent drove earnings to exceed company expectations.
Loss per diluted share of $1.62 included charges of 8 cents associated with the impact of COVID-19. Results topped Wall Street’s consensus target calling for a loss of $1.46 a share.
For the second quarter ended August 1, 2020, sales were in-line with the company’s expectations. The 53 percent decline to $1.78 billion reflected temporary store closures for approximately 50 percent of days during the quarter due to COVID-19 in addition to an approximately 10-percentage point timing impact from the Nordstrom Anniversary Sale shifting from the second quarter to the third quarter.
Sales were well below Wall Street’s average target of $2.4. billion.
“At the onset of the pandemic, we focused on protecting and enhancing liquidity, and we successfully executed on these plans,” said Erik Nordstrom, chief executive officer of Nordstrom, Inc. “Thanks to our team’s efforts during the second quarter, we further strengthened our balance sheet with the liquidity of $1.3 billion and generated operating cash flow of more than $185 million. We are now pivoting to prioritize market share gains and profitable growth as we advance our strategies.”
“We’re confident that we can improve sales trends in the second half of the year and beyond,” said Pete Nordstrom, president and chief brand officer of Nordstrom, Inc. “Our inventories are current and in-line, and we’re focused on amplifying relevant categories, brands and trends to meet customers’ changing preferences.”
- Second-quarter net loss of $255 million, which included after-tax COVID-19 related charges of $14 million primarily related to corporate asset impairments, decreased from net earnings of $141 million during the same period in fiscal 2019.
- Losses before interest and taxes of $370 million, which included pre-tax charges of $23 million related to COVID-19, decreased from earnings before interest and taxes (“EBIT”) of $216 million during the same period in fiscal 2019 primarily due to lower sales volume from temporary store closures in response to COVID-19.
- In Full-Price, net sales decreased 58 percent. Excluding the Anniversary Sale event shift impact, Full-Price sales decreased in the mid-forties percent range. Off-Price net sales decreased 43 percent compared with the same period in fiscal 2019. Top-performing merchandise categories included home, kids wear, accessories, beauty and active in both Full-Price and Off-Price.
- Total company digital sales decreased 5 percent. Excluding the Anniversary Sale event shift impact, digital sales increased approximately 20 percent in the second quarter and in the mid-teens range on a year-to-date basis. The Company’s e-commerce business continued to experience significant growth in new Nordstrom customers of more than 50 percent.
- Gross profit, as a percentage of net sales, was 21 percent, decreasing from 35 percent for the same period in fiscal 2019 due to planned markdowns and deleverage from lower sales volume and reflected a sequential improvement in merchandise margin trends.
- Ending inventory decreased 24 percent from last year. Excluding the Anniversary Sale event shift impact, the decrease in inventory was in-line with the decrease in sales.
- Selling, general and administrative (“SG&A”) expenses, as a percentage of net sales, was 47 percent compared with 31 percent for the same period in fiscal 2019. Excluding charges related to COVID-19, total SG&A decreased approximately 33 percent from last year, primarily due to lower sales volume in addition to reduced overhead costs of nearly 20 percent.
- The income tax benefit of $166 million, or 40 percent of the pretax loss, reflects a higher projected benefit rate for fiscal 2020 due to the carryback of net operating losses as permitted under the CARES Act.
Photo courtesy Nordstrom
