Bucking both the downcast mood at retail and a hammering across-the-board on Wall Street, Nordstrom Inc. delivered robust third-quarter earnings on strong sales Monday.
Bolstered by the sale of its Façonnable chain, Nordstrom noted that while markdowns during the quarter ate away at gross margins, its inventories are in good shape as the retailer navigates a challenging economic environment.
Nordstrom released its numbers after the closing bell Monday. Like other retailers, its stock had dropped sharply throughout the day; after the numbers were released Nordstrom stock rallied back over 11 percent in after-hours trading.
Net income for the quarter ended Nov. 3 surged 22.1 percent to $165.7 million, or 68 cents a diluted share, from $135.7 million, or 52 cents, in the prior year on sales that gained 5.3 percent to $1.97 billion from $1.87 billion. Same-store sales for the quarter showed an increase of 2.2 percent. The gain from the sale of Façonnable net of tax was $20.9 million.
Façonnable was sold to the Lebanese buyout firm M1 Group for $210 million during the summer.
Blake Nordstrom, president, said on a conference call with analysts that "all areas of our designer business continue to show strong results....Within the marketplace we are encouraged by the unique position we find ourselves in, and the amount of market share available for us to take advantage of gives us tremendous headroom to improve."
Nordstrom said the difficult retail landscape left the company with excess women's apparel, but the company is now on track.
"We take full accountability and are confident that our team has taken the necessary steps to put us back in a position of strength," he said. "In fact, today, we are back on track with our inventory plans. We also think we are well positioned for the important holiday sales time periods."
Because of markdowns during the quarter, the gross margin rate dropped to 37.65 from 38.03 percent. "Merchandise margin rate was unfavorably impacted by increased markdowns," the retailer said in a statement. "During the quarter, the company made good progress in aligning inventory levels to business trends. We believe inventories will be in line by yearend."
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