The Retailer Has Also Increased Its Yearly Forecast Following the Sales Growth
Nordstrom Inc. saw an after-hours jump of 6.5% in its stock price following an uptick in second-quarter sales. The sales improvement has prompted the retailer to revise its forecast for the year upwards.
Despite net earnings experiencing a dip due to an asset impairment charge, the company’s net sales rose by 3.4% to reach $3.89 billion. In the same period, comparable sales rose by 1.9%. These results outperformed the department store’s competitors such as Macy’s and Dillard’s, both of which reported negative sales for the second quarter due to cautious consumer spending and inflationary pressures.
Boosted by the strong second-quarter results, the Seattle-based company slightly raised its comparable sales forecast for 2024 from its previous estimate of negative 1% to positive 2% to a new forecast of between flat and ahead by 2%.
Nordstrom executives revealed that the best-performing categories were activewear, women’s apparel, beauty, and children’s items across both the Nordstrom and Nordstrom Rack brands. The business was driven by enhanced merchandise flow, a boost in full-price selling, the roll-out of radio frequency identification for faster inventory data, and traction in private brands following a brand refresh earlier in the year.
“Our second-quarter results were solid, and we’re encouraged by the continued top-line strength in both banners and the progress we’re making to expand gross margin and increase profitability,” said Erik Nordstrom, chief executive officer of Nordstrom, Inc. “We’re confident in our outlook for the remainder of the year and look forward to sustaining the momentum we’ve built as we execute on our 2024 priorities.”
The net earnings of Nordstrom for the second quarter were $122 million, or 72 cents per diluted share. This compares to net earnings of $137 million, or 84 cents per share, for the same period the previous year. The company’s earnings before interest and taxes (EBIT) reached $190 million, which is slightly below the previous year’s EBIT of $192 million. However, the adjusted EBIT of $244 million, which excludes a charge concerning supply chain asset impairment, actually exceeded the previous year’s EBIT.
Erik Nordstrom explained during a conference call that the strategic decision was made during the second quarter “to cease build-out and planning of a leased omnichannel center, intended for future use in the Pacific Northwest.”
The decision was made because logistics networks have recovered from the supply chain problems triggered by the pandemic, and the company has optimized its supply chain operations over the past few years. The CEO also added that the company found it could serve West Coast customers more efficiently from its current supply chain network, without incurring additional costs for facility expansion, hence the asset impairment charge that was reflected in its results.
Nordstrom banner net sales and comparable sales each experienced a modest increase of 0.9% compared with the same period in fiscal 2023. Gross merchandise value rose by 1.1%. While Nordstrom Rack banner net sales increased by a notable 8.8% and comparable sales grew by 4.1% compared with the previous year. Digital sales also increased 6.2% compared to the same period in fiscal 2023, making up 37% of total sales during the quarter.
Inventory swelled by 8.3% compared to the same period in fiscal 2023 while sales grew by 3.4%. Nordstrom executives have not given more updates on the Nordstrom brothers’ intention to take the company private as of yet.