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Nordstrom Profits Up 20 Percent

Retailer credited its anniversary sale, which offers shoppers new merchandise at a discount, for much of the period’s success.

Nordstrom

Everybody loves a good fashion deal, even in hard times.

Take it from Nordstrom Inc., which on Thursday said net earnings rose 20 percent in the second quarter ended July 30, and credited its anniversary sale, which offers shoppers new merchandise at a discount, for much of the period’s success.

Nordstrom’s earnings rose to $175 million, or 80 cents a diluted share, from $146 million, or 66 cents a diluted share, in the same quarter last year. Same-store sales increased 7.3 percent, marking the Seattle-based retailer’s seventh-straight quarter of same-store gains. Net sales rose 12.4 percent in the quarter to $2.72 billion, from $2.42 billion in the same period in fiscal 2010.

“The anniversary sale was a significant factor. It was the best yet in the history of our company,” said Nordstrom Inc. president Blake Nordstrom, during a conference call. “It remains unique. It offers the customer preseason savings on new merchandise. After the event, everything goes back to regular price. It’s fresh new merchandise at considerable savings. Our customers love it.”

The anniversary sale is Nordstrom’s biggest sale of the year. It starts in mid-July and lasts two weeks. The event this year had the added dimension of providing early access for reward customers.

In addition, “strong executions” on two clearances — the half-yearly women’s and kids sale and the half-yearly men’s sale — helped the quarter, though Nordstrom officials said full-price selling outpaced these clearances and that they are becoming less significant.

Nordstrom’s showing beat Wall Street estimates and the retailer raised guidance for the year to $2.95 to $3.10 in diluted earnings per share from an earlier $2.80 to $2.95 forecast. Nordstrom also expects same-store sales to grow 4 to 6 percent for the year.

Nordstrom’s results mirrored the double-digit profit gains reported by Macy’s Inc., Ralph Lauren Corp. and Kohl’s Corp. earlier this week.

Shares of Nordstrom closed up 5.5 percent to $42.33 prior to its after-market earnings report. Equity markets rose sharply Thursday, pushing retail stocks up 3.8 percent after Wednesday’s 4.6 percent decline, while the Dow Jones Industrial Average advanced 4 percent, or 423.37 points, to 11,143.31, recapturing most of Wednesday’s losses. The S&P Retail Index increased 17.46 points to 483.36.

Signs of U.S. economic weakness and the fears that the debts of Italy and Spain or others could cripple the banking sector have had markets on a ragged path over the last two weeks as investors sought safety and direction.

At Nordstrom, shoes, cosmetics and designer apparel were standouts in the quarter, though according to Pete Nordstrom, president of merchandising, women’s apparel lately has “lagged the average. We hope to have some things we can talk about in coming quarters on the work we are doing to improve the business.”

Regionally, the South and Midwest were the top performers for full-line stores. The direct channel continued to show strong sales growth, outpacing the overall Nordstrom increase. Nordstrom Rack’s net sales increased $92 million, or 23.4 percent, with same-store sales up 4.8 percent. Rack will open 17 stores this year and about 13 next year.

Nordstrom’s renowned customer service has been ramped up this year. An enhanced mobile Web site was launched in June and about 6,000 associates were outfitted with mobile point-of-sale devices to speed checkouts and locate merchandise. “As we learn more, we are in a strong position to accelerate the utilization and add more if needed,” noted Jamie Nordstrom, president of direct. “Direct is the fastest growing part of the business.” He also said there are “opportunities to personalize the online experience, and selection…how we might able to have a selection a little more specific to online store.”

The company’s strong balance sheet, with $1.1 billion in cash at the end of the quarter, positions it for further investments in technology and elsewhere. According to Jamie Nordstrom, “We will be adding more features and functionality to meet our customers’ expectations online.”