By  on August 13, 2010

Nordstrom Inc. late Thursday met expectations with a 39 percent jump in second-quarter earnings as healthy increases in sales in its other operations more than offset a slight decline in same-store sales at Nordstrom Rack.

For the three months ended July 31, net income was $146 million, or 66 cents a diluted share, compared with $105 million, or 48 cents, a year ago. Boosting the bottom line was a $12 million reduction in selling, general and administrative expenses for its credit operations, much of it attributable to a $15 million cut in its reserve for bad debt, a reflection of improved credit trends. Delinquencies dropped to 3.5 percent of accounts receivable from 4.2 percent at the end of the first quarter and 3.6 percent a year ago.

Sales rose 12.7 percent to $2.42 billion from $2.15 billion and, with the addition of funds from its credit card operation, total revenues increased to $2.52 billion from $2.23 billion. Nordstrom said multichannel comparable-store sales rose 9 percent, with an 8.2 percent comp increase in full-line stores and a 34.1 percent climb in direct sales. Comps during the anniversary sale event rose 9 percent, with jewelry, dresses and women’s shoes as the top-performing categories.

Comps at Nordstrom Rack dipped 0.9 percent, but executives on the company conference call said they continue to see the operation as a growth opportunity. On the company conference call, Mike Koppel, executive vice president and chief financial officer, called it “a productive business model and its new stores are performing above plan.”

The Seattle-based upscale retailer noted sales per square foot were up 8.3 percent while inventory per square foot rose 8.7 percent compared with the comparable 2009 period.

For the six months, income rose 40.9 percent to $262 million, or $1.18 a diluted share, from $186 million, or 86 cents, last year. Total revenues rose 14.4 percent to $4.6 billion from $4.02 billion.

Blake Nordstrom, president, said on the call that the “first half had exceeded our expectations. We’re particularly encouraged by our sales results and how the customer is responding to our merchandise and services.”

He added the anniversary sale event benefited from a shared inventory platform that combined its full-line and direct businesses, allowing the retailer to add more anniversary items in its direct fulfillment center to better meet customer demand.

“From our point of view, we have not seen any change throughout this year,” Nordstrom said of the state of consumer spending. “Nor do we expect in the foreseeable future a change upward or downward with our customers.”

The company maintained its forecast for fiscal 2010, with earnings per diluted share in the $2.50 to $2.65 range, and a 4 to 6 percent comps gain. Analysts had expected earnings per share of $2.62 for the year. Shares fell 4.3 percent to $32 in after-hours trading after closing down 0.4 percent at $33.44 prior to the announcement.

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