By  on August 18, 2006

Nordstrom Inc. on Thursday reported net income rose 20 percent to $178.8 million in the second quarter ended July 31 on a 7.8 percent rise in sales to $2.3 billion.

Earnings per share rose 26 percent to 67 cents, compared with 53 cents in the same period last year, and were ahead of expectations. The results compare with net income of $148.9 million last year on sales of $2.1 billion in the second quarter of 2005. Same-store sales for the period gained 5.7 percent.

Unlike most retailers, Nordstrom's second-quarter sales are an important contributor to the company's annual results, roughly equaling 90 to 95 percent of its fourth-quarter volume.

In June, Nordstrom's experiences clearance activity, as most retailers do. Its anniversary sale in July produces the highest sales volume days of the entire year. Mike Koppel, executive vice president and chief financial officer, said on a conference call with Wall Street analysts that the June clearances and anniversary sale delivered positive same-store sales increases, while regular-priced business showed strength in the quarter.

The anniversary sale is significant because it offers insight into how customers will respond to fall merchandise; the sale is a preview of the season.

The strongest regional performance for full-line stores was in the Northwest, where merchandise categories ahead of plan included men's apparel, cosmetics, accessories and intimate apparel. Nordstrom's Rack division extended its streak of double-digit same-store sales increases to 24 months. Gross profit margin increased 26 basis points for the quarter over last year and merchandise margin was above plan and beat last year's results.

"We're beginning to see some traction from our cohesive approach in women's apparel," Pete Nordstrom, president of merchandising, said on the call. "As we move into the fall season, we have a lot of work ahead of us."

While the anniversary event produced only a 2.1 percent sales increase in stores, when combined with the online business, the increase was 4.1 percent.

"We've had some challenges over the last quarter or two in Brass Plum [teen fashion], women's and juniors," Nordstrom said. "That's a big part of our business, particularly during the anniversary sale. So when that isn't particularly healthy in an event like that, it drags the total down."

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