By  on November 21, 2006

If you are in the upscale fashion business watch out: Nordstrom Inc. is coming at you.

Merchandise upgrades and a push into the designer market at the Seattle-based chain are paying off. Margins are rising, and there's heady expansion in the works.

On the strength of regular-price selling and higher ticket prices, particularly in apparel, Nordstrom reported a 26.3 percent rise in net earnings to $135.7 million, or 52 cents per diluted share, for the third quarter ended Oct. 28. That compares with net profits of $107.5 million, or 39 cents per diluted share, in the corresponding period a year earlier.

Total sales for the quarter rose 12.4 percent to $1.9 billion, compared with $1.7 billion in the year-ago period, and comp-store sales rose 10.7 percent.

"Regular-priced selling across our women's department has really changed for the better," Pete Nordstrom, president of merchandising, said during a conference call. "This category has been the toughest one for us to improve."

The company said all major merchandise categories performed above the low-single- digit growth plan, and that results in intimate apparel, accessories, women's better and designer apparel exceeded the company's overall percent gain.

The Nordstrom Direct operation, including its Web site and catalogue, and the Rack chain achieved double-digit same-store growth. Gross profit as a percent of sales increased 156 basis points versus the prior year. Selling, general and administrative expenses as a percentage of sales decreased 17 basis points versus the prior year, and would have decreased further were it not for $6.5 million in compensation costs linked to the price of the company's stock, which appreciated 38.4 percent in the quarter.

Moreover, Nordstrom has been sailing along, year-to-date. Net earnings increased 23.5 percent to $445.7 million for the nine-month period, while sales increased 9.3 percent to $5.9 billion, and 7.2 percent on a comp basis.

On the expansion front, Nordstrom unveiled a flurry of openings well out in the future, at malls owned by General Growth Properties: in spring 2009, at Fashion Place in Murray, Utah.; in fall 2009, at the Kenwood Towne Centre in Cincinnati; in spring 2010, at the Galleria in St. Louis, and in spring 2011, at Christiana Mall in Wilmington, Del. Last month, Nordstrom opened a new store in the Westfield Topanga Mall in Canoga Park, Calif., a 213,000-square-foot unit with the company's "most comprehensive designer offering in the country, along with new design concepts, amenities and services," the retailer said.

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