NEW YORK — Better-than-expected sales and lower costs spurred Nordstrom Inc. to double-digit earnings gains for the fourth-quarter and year-end periods.
The Seattle-based upscale department store chain reported a 34.1 percent earnings gain to $140 million, or $1 a diluted share, for the three months ended Jan. 29. Comparatively, the company reported earnings of $104.3 million, or 74 cents a share, in the same period a year ago.
“Our strongest regional performance was in the Southern states, and our best performing merchandise divisions were women’s and kids’ shoes, accessories, junior, women’s and men’s apparel,” said chief financial officer Michael Koppel on the retailer’s conference call.
Wall Street analysts had expected earnings per share of $1.02. According to the company, earnings were negatively affected by a one-time, $4.7 million charge stemming from a change in its lease accounting policy, a hit of 3 cents a share. Excluding the charge, earnings would have been $144.7 million, or $1.03 a share.
Sales for the period increased 9.4 percent to $2.1 billion, compared with sales of $1.92 billion in the year-ago period.
Selling, general and administrative costs fell 160 basis points to 26.9 percent of sales, or $565.5 million. SG&A costs came in at 28.5 percent of sales, or $547.5 million, in the year-ago period.
Emme P. Kozloff, an analyst with Bernstein Research, believes the company stands out among its department store brethren and has ample opportunity to continue to grow. “[Nordstrom] is a differentiated business in the challenging area of department store retailing,” said Kozloff in a research report released a day before earnings were reported.
Kozloff believes the implementation of new technology will continue to drive sales for the company. “In 2004 [Nordstrom] delivered the second-highest productivity rate of the department store group in terms of sales-per-square-foot. [Nordstrom] has actually rebounded from a 2001 low of $321 to a new high this year of $351,” said Kozloff. “Although the company has surpassed its historical high of $350 reached in 1999, we believe that [Nordstrom] still has opportunity to increase this further given its more impactful merchandising and allocation system and the upcoming implementation of markdown and replenishment optimization tools.”
Nordstrom’s investment in technology has been the story for A.G. Edwards analyst Robert Buchanan as well. According to a report from Buchanan, the retailer spent $350 million on technology over the last four years. The investments helped make significant improvements in inventory management. According to the retailer, the company spent $100 million on upgrading its point-of-sales system.
Earnings for the year vaulted 62 percent to $393.5 million, or $2.77 a share, from $242.8 million, or $1.76 a share, in the previous year.
Sales advanced 10.6 percent to $7.13 billion from $6.45 billion.
SG&A costs dipped 110 basis points to 28.3 percent of sales, or $2.02 billion, from 29.4 percent of sales, or $1.9 billion.