Nordstrom, Inc. reported fourth-quarter results in line with the company’s fiscal year 2021 outlook, demonstrating progress against its long-term growth strategy.

The company reported net earnings of $200 million, or $1.23 per diluted share (“EPS”), and earnings before interest and taxes (“EBIT”) of $299 million, or 6.8 percent of sales, for the fourth quarter. For the fiscal year ended January 29, 2022, net earnings were $178 million and diluted EPS was $1.10, with EBIT of $492 million, or 3.4 percent of sales. Net earnings for the fiscal year included an $88 million debt refinancing charge ($65 million after-tax, or diluted EPS of $0.40) in the first quarter.

For the fourth quarter ended January 29, 2022, net sales increased 23 percent versus the same period in fiscal 2020 and decreased 1 percent versus the same period in fiscal 2019. Gross merchandise value (“GMV”) increased 24 percent versus the same period in fiscal 2020 and was flat versus the same period in fiscal 2019. Nordstrom banner net sales were flat and GMV increased 2 percent compared with the fourth quarter of 2019. Net sales for Nordstrom Rack decreased 5 percent versus the fourth quarter of fiscal 2019, a sequential improvement of 320 basis points over the third quarter.

Sales in the home, active, designer, beauty, and kids categories had the strongest growth compared with the fourth quarter of 2019. Geographically, Nordstrom banner sales in the Southern markets, including Southern California, outperformed the Northern markets by approximately 7 percentage points. Suburban stores continued to be stronger than urban stores in the fourth quarter.

“We advanced our strategic initiatives this quarter, with sequential sales improvement, strong digital growth and a significant increase in profitability,” said Erik Nordstrom, chief executive officer of Nordstrom, Inc. “Our team continues to work with urgency to accelerate our progress and invest in our capabilities to better serve customers and profitably grow sales. Our primary focus is on three areas: improving Nordstrom Rack performance, increasing profitability and optimizing our supply chain and inventory flow. Our progress has given us a line of sight to achieve in the coming year the financial targets we presented at our 2021 Investor Event.”

The company made significant progress on its merchandising strategies throughout 2021, with choice count at an all-time high, increasing 50 percent over last year, and more than 300 new brands launched during the year. Additionally, alternative vendor partnership models accounted for 10 percent of Nordstrom banner GMV in the fourth quarter, up from 7 percent in 2019.

“We drove a significant increase in merchandise margin this quarter, as we engaged customers through our compelling and expanded holiday gift offering, while also reducing promotional activity,” said Pete Nordstrom, president and chief brand officer, Nordstrom, Inc. “Looking ahead, we are focused on more effectively balancing inventory with demand while increasing efficiency throughout our network and delivering newness and selection to our customers.”

The company continued to navigate global supply chain disruptions throughout the quarter by accelerating receipts and investing in improved in-stock levels. Inventory levels at the end of the quarter were higher than planned, but the company expects to reduce its inventory relative to sales during the first quarter of fiscal 2022.

Nordstrom continued to strengthen its financial position and reduced its leverage ratio to 3.2 times at the end of fiscal 2021. Subject to the completion of certain year-end certification requirements with its bank group, the company anticipates that it will be in a position to resume returning cash to shareholders in the first quarter of fiscal 2022.

Fourth Quarter 2021 Summary

  • Total company net sales in the fourth quarter increased 23 percent compared with the same period in fiscal 2020. Net sales decreased one percent compared with the same period in fiscal 2019, consistent with the third quarter of 2021. After taking into account an approximately 200 basis point impact due to the timing of this year’s Anniversary Sale, fourth-quarter sales improved sequentially over the third quarter. Full-year revenue for fiscal 2021, including retail sales and credit card revenues, increased 38 percent compared with fiscal 2020. GMV was flat in the fourth quarter and decreased 4 percent in fiscal 2021 when compared with the same periods in 2019.
  • For the Nordstrom banner, net sales in the fourth quarter increased 23 percent compared with the same period in fiscal 2020 and were flat against the same period in fiscal 2019. GMV increased 2 percent and decreased 2 percent in the fourth quarter and in the fiscal year, respectively, when compared with the same periods in 2019.
  • For the Nordstrom Rack banner, net sales increased 23 percent and decreased 5 percent compared with the same periods in fiscal 2020 and fiscal 2019, respectively. Fourth-quarter net sales were a sequential improvement of 320 basis points over the third quarter of 2021.
  • Digital sales in the fourth quarter decreased 1 percent compared with the same period in fiscal 2020 and increased 23 percent compared with the same period in fiscal 2019. Digital sales represented 44 percent of total sales during the quarter and 42 percent of sales for the fiscal year.
  • Gross profit, as a percentage of net sales, of 38 percent increased 500 basis points compared with the same period in fiscal 2020, and increased 340 basis points compared with the same period in 2019, due to improved merchandise margins from reduced markdowns, and increased leverage on buying and occupancy costs.
  • Ending inventory increased 19 percent compared with the same period in fiscal 2019, versus a 1 percent decrease in sales. Approximately half of the inventory increase versus 2019 was due to planned investments to prioritize in-stock levels.
  • Selling, general and administrative (SG&A) expenses, as a percentage of net sales, of 34 percent decreased 125 basis points compared with the same period in fiscal 2020, primarily due to leverage on higher sales, partially offset by labor cost pressure. SG&A expenses, as a percentage of net sales, increased 340 basis points compared with the same period in fiscal 2019 primarily as a result of fulfillment and labor cost pressures, partially offset by the non-cash asset impairment in 2019 of $32 million resulting from the integration of Trunk Club and continued benefit from resetting the cost structure in 2020.
  • EBIT was $299 million in the fourth quarter of 2021, compared with $30 million during the same period in fiscal 2020, primarily due to higher sales volume and improved merchandise margins, partially offset by labor cost pressure. EBIT was flat versus the fourth quarter of fiscal 2019, which included the impact of the Trunk Club impairment charge. EBIT margin was 6.8 percent of sales for the quarter, which was 10 basis points higher than the fourth quarter of 2019, and 3.4 percent for the fiscal year.
  • Interest expense, net, of $33 million decreased from $48 million during the same period in fiscal 2020 as a result of the redemption of the 8.75 percent secured notes during the first quarter of fiscal 2021 and the 4.0 percent unsecured notes during the second quarter of fiscal 2021.
  • Income tax expense during the fourth quarter was $66 million, or 25 percent of pretax earnings, compared with an income tax benefit of $51 million in the same period of fiscal 2020. Last year’s income tax included benefits associated with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
  • Fourth-quarter net earnings of $200 million increased from $33 million during the same period in fiscal 2020 primarily due to higher sales volume and gross margin.
  • The company finished the year with $1.1 billion in liquidity including $322 million in cash and the full $800 million available on its revolving line of credit, and a leverage ratio of 3.2 times.

Fiscal Year 2022 Outlook

  • Revenue growth, including retail sales and credit card revenues, of 5 to 7 percent versus fiscal 2021;
  • EBIT margin of 5.6 to 6.0 percent of sales;
  • Income tax rate of approximately 27 percent;
  • Earnings per share of $3.15 to $3.50, excluding the impact of share repurchase activity, if any; and
  • Leverage ratio of approximately 2.5 times by year-end.

Photo courtesy Nordstrom