NEW YORK — Nordstrom Inc. felt the wrath of analysts Monday when it came out with first-quarter results that were better than a recent forecast.
The company said a systems error deflated recent estimates, allowing the Seattle-based better department store firm to turn in a better than anticipated first quarter.
However, analysts made it clear, and company executives acknowledged, that the inaccurate approximation had damaged the firm’s credibility. Nordstrom’s officials promised better in the future.
Net income mounted to $27.2 million, or 20 cents a share, for the quarter ended May 3. This compared with year-ago losses of $24.6 million, or 18 cents, a mark that was deflated by $55 million in non-recurring charges and impairment related to an accounting change and the purchase of a minority interest in nordstrom.com. Without the one-time items, profits for the first-quarter fell below the year-ago level of $30.4 million, or 22 cents.
Sales for the three months increased 7.8 percent to $1.34 billion from $1.25 billion a year ago. Comparable-store sales fell 1.4 percent.
In a statement, president Blake Nordstrom noted: “Despite the challenging retail environment, we are encouraged by our relative sales performance this past quarter and we are working diligently to continue to build market share. We remain focused on our core initiatives of achieving sustained same-store sales increases through service and merchandise, integrating new technology and reducing expenses, as there are the key drivers of future improvement.”
However, it was the missed forecast that dominated the late afternoon conference call with analysts. On May 7, the Seattle-based retailer pegged its earnings for the quarter at a range of 12 to 15 cents a share — 5 to 8 cents below the profits realized in the quarter.
Mike Koppel, executive vice president and chief financial officer, acknowledged on the call, “The magnitude of this difference is not acceptable.”
Nordstrom’s inventory stock ledger system, implemented in February, was not accurately recording the firm’s freight expense, Koppel noted. The firm also finished putting a new inventory system in place during the quarter, which required the new stock ledger system.
Some of the difference between the projection and the actual result was a product of higher-than-planned sales volume in Nordstrom’s European Façonnable wholesale business.In all, income came in about $11 million higher than anticipated.
Koppel added, “We are extremely aware of the serious impact this has on our creditability with you, the investment community. We are taking the necessary steps to improve the accuracy of our projections.”
Nordstrom has been updating its technology to keep pace with the industry.
“We’ve got a lot going on and we’re way behind in terms of technology infrastructure,” said Koppel. “We’ve done a lot in the last couple of years.”
He assured analysts and investors, though, “We have validated this system and we’re confident that this is not going to give us any more surprises in terms of margin.”
Nordstrom added, “Mike and I along with our entire leadership own this. We are committed to improving the forecasting process.”
Markdowns are expected to continue to pressure the firm in the second quarter, when it’s looking for flat comp-stores sales and earnings of 35 to 40 cents a share. For the year, comps should also be flat with earnings of $1.19 to $1.23 a share.
Earnings were released after the close of the market, but Nordstrom shares gave up 30 cents, or 1.9 percent, during the day Monday to close at $15.86 in New York Stock Exchange trading.
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews