Nordstrom Inc., paced by its online and off-price operations, turned its third quarter around, posting net earnings of $114 million compared with a net loss of $10 million a year ago.
Earnings before interest and taxes were $208 million, or 5.9 percent of net sales, for the quarter ended Oct. 28, compared to $55 million, or 1.6 percent of net sales, during the same period in fiscal 2016.
Total sales increased 2 percent to $3.5 billion; comparable sales decreased 0.9 percent. The estimated lost sales impact from the hurricanes was approximately $20 million, or 60 basis points.
Nordstrom’s third-quarter showing was in contrast to Macy’s, Dillard’s and Kohl’s, with Macy’s reporting sales slippage in the third quarter but managing a significant profit improvement. Kohl’s reported a decline in income and virtually flat sales for the period, while Dillard’s was down on both profits and sales.
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In the Nordstrom brand, including U.S. and Canada full-line stores and nordstrom.com, net sales when combined with Trunk Club, decreased 1.2 percent and comparable sales decreased 1.9 percent. The top-ranking merchandise categories were men’s and kids apparel. The West was the top-ranking U.S. geographic region.
At the Nordstrom Rack brand, which consists of Nordstrom Rack stores and nordstromrack.com/hautelook, net sales increased 5.5 percent and comparable sales increased 0.8 percent. The West was the top-ranking geographic region.
Earnings per diluted share came to 67 cents, which includes a 4 cent reduction due to hurricanes Maria, Irma and Harvey, which affected stores in Puerto Rico, Southeast Florida and Houston.
“The damage in Puerto Rico was particularly extensive, requiring us to close the store as we continue our repair efforts,” said Blake Nordstrom, copresident, during a conference call. “When adjusting for this impact, our overall sales performance was generally in line with our expectations. This reflected consistent trends at our full-price business while on off-price, we experienced of deterioration relative to recent trends. In our Nordstrom brand, total sales decreased 1.2 percent and comps decreased 1.9 percent.
At Nordstrom Rack, total sales increased 5.5 percent and comps increased 0.8 percent. He said Rack was too aggressive with its sales plan at the beginning of the year. “As a result, we found ourselves over-inventoried with the fluidity necessary to chase the business. This impacted our ability to provide newness, which led to softer results in the third quarter. We have made significant adjustments to our receipt plans to bring our inventories in line and believe we’re well-positioned for the fourth quarter in this regard.”
He said Nordstrom Rack “remains a highly productive model” and is approaching $5 billion in sales for the year.
He also commented on Nordstrom Local, a test retail concept focused on services. It’s located in West Hollywood, Los Angeles, and offers personal stylists, alterations, online ordering and other services.
“In the four weeks since opening, we got thousands of customer interactions and are applying the learnings to innovate further,” Nordstrom said. “Ultimately, our goal is to drive increased customer engagement and market share.
He also said that reserve online service has expanded to more than 50 stores. “Our customers appreciate its speed and convenience. It frees up their time. And if they choose to do additional shopping in our store, this results in a material lift in their spend.”
Next month, Nordstrom will offer 24-hour curbside pickup in major markets including Seattle, Chicago, Dallas and San Diego, adding to Nordstrom’s litany of services.
Nordstrom said the in-house Treasure and Bond brand was “our largest brand launch ever generating $2 million in demand for the first day. We made additional progress in growing limited distribution products, and our private-label brands continue to outperform the company average.”
Nordstrom had no comment on the decision to postpone efforts on exploring taking the company private until next year.
Copresident Pete Nordstrom during the call indicated that the beauty business has been “consistently good.” The more the company elevates with prestige brands and differentiated products, the better the performance, he added. “Prestige brands, wellness, natural — our team has been all over that stuff,” he said.
He also said the handbag category has improved. “The biggest driver is designer handbags, which has been very good.”