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Nordstrom Gains in 2nd Quarter

NEW YORK — Nordstrom Inc. drove second-quarter profits ahead of projections with advancing sales — a rarity so far this quarter — and improved gross margins.<br><br>Net income jumped 18.4 percent to $45.8 million, or 34 cents a...

NEW YORK — Nordstrom Inc. drove second-quarter profits ahead of projections with advancing sales — a rarity so far this quarter — and improved gross margins.

This story first appeared in the August 15, 2002 issue of WWD.  Subscribe Today.

Net income jumped 18.4 percent to $45.8 million, or 34 cents a share, from $38.7 million, or 29 cents, a year ago.

Results include a non-recurring charge of $11 million, or 5 cents a share, to complete the purchase of the minority interest in Nordstrom Direct, formerly nordstrom.com. Without the charge, EPS rose to 39 cents a share, a couple of pennies ahead of Wall Street’s estimates of 37 cents.

In its Form 10-Q to be filed with the Securities and Exchange Commission on the quarter, Nordstrom also expects to record a non-recurring charge of up to $17 million before taxes. The charge, the exact amount of which hasn’t yet been determined, relates to an existing investment in a supply chain tool in the firm’s product development division. No other non-recurring charges are expected in the back half.

Sales for the period ended July 31 climbed 7.1 percent to $1.66 billion from $1.55 billion a year ago. Comparable-store sales increased 2.2 percent, consisting of a 1.5 percent uptick at its full-line doors and an 8.7 percent jump at The Rack and other stores. Cosmetics, accessories and women’s activewear were the strongest categories in the quarter.

Nordstrom, which made comp-store gains a focus this year, saw increases in each of its businesses during each month of the quarter.

“This improvement is not a result of merchandise changes made during the quarter, but rather the culmination of our efforts of the last 12 to 18 months,” said Blake Nordstrom, president, on a conference call with analysts. “The past two years have been about positioning Nordstrom for growth. This boiled down to rallying the organization to a manageable number of initiatives.”

Gross margins during the quarter improved by 60 basis points to 33.3 percent of sales. Selling, general and administrative expenses slid 50 basis points to 29.1 percent of sales. Comp inventories, at cost, were down 8 percent in the quarter.

For the half, earnings fell 64.5 percent to $21.3 million, or 16 cents a share, from $63.5 million, or 47 cents, a year ago.

Without non-recurring charges and an accounting change, EPS of 61 cents during the quarter compared with 47 cents a year ago.

Sales for the six months pushed up 5 percent to $2.9 billion from $2.76 billion a year ago.

For the third quarter, the Seattle-based firm is looking for earnings of 16 to 20 cents a share, compared with 8 cents a year ago.

Comps for the quarter are set to rise by a low-single digit percentage. Gross margins are expected to show a “significant improvement” as a percent of sales while SG&A is projected at even with a year ago, also as a percent of sales.

Shares of the retailer traded up Wednesday, before the after-market earnings report, to $18.44, an improvement of $1.21, or 7 percent, on the New York Stock Exchange.

For the year, earnings per share, excluding non-recurring items, are slated for $1.20 to $1.24, versus 93 cents a year ago. Previously, the firm was looking for earnings of $1.18 to $1.22 a share for the 12 months.