Nordstrom's total company digital sales grew 4 percent and represented 30 percent of the business.

Though the business wasn’t perfect on all fronts, Nordstrom Inc. reported an 11.7 percent increase in fourth-quarter earnings, exceeding expectations and outperforming competitors Macy’s Inc. and Dillard’s, which earlier this week posted declines.

This story first appeared in the February 24, 2017 issue of WWD. Subscribe Today.

Earnings rose to $201 million, from $180 million a year ago, while net sales increased 2.4 percent to $4.24 billion from $4.14 billion, and comparable sales decreased 0.9 percent.

The company was lifted by gains at its off-price division, “outsized growth” of its online business and “continuous improvements to its operating model,” though results at the full-line stores were soft.

While not happy with the performance of its full-line stores, officials cited some positive trends at the department stores, including increased full-price selling, strong inventory management and operating efficiencies, and increasing product differentiation. Combined, sales at Nordstrom’s U.S. and Canada full-line stores, nordstrom.com, and Trunk Club decreased 1.1 percent and comparable sales fell 2.7 percent.

Across U.S. full-line stores and nordstrom.com, the top-performing merchandise categories were women’s apparel and beauty. The younger customer-focused departments in women’s apparel continued to outperform, reflecting strength in denim and collaborations with new and emerging limited distribution brands, the company said.

Nordstrom Rack and nordstromrack.com/hautelook combined net sales increased 10.7 percent and comparable sales increased 4.3 percent.

Nordstrom said the East Coast was the top-performing geographic region.

Retail gross profit increased 112 basis points compared with the same period in fiscal 2015, reflecting “strong inventory execution in addition to reduced competitive markdowns.” Inventory declined 2.5 percent which reflected a positive spread of 5 percentage points relative to sales growth.

For the year, net earnings fell to $354 million from $600 million, with earnings before interest and taxes of $1.1 billion representing a decrease of $210 million relative to last year, primarily due to asset impairment charges and other non-operational items in 2016 and 2015. Excluding these items, retail EBIT decreased $55 million, primarily due to higher technology and fulfillment costs supporting multichannel growth.

Total net sales for the year reached $14.5 billion, a 2.9 percent increase compared to net sales of $14.1 billion in 2015. Comparable sales for the fiscal year 2016 decreased 0.4 percent.

Copresident Blake Nordstrom said on a conference call with analysts, “It’s worth noting that we continue to see a greater share of our business shifting to regular price. Promotional sales in response to the competitive environment lessened relative to last year demonstrating our momentum with growing relevant brands including limited distribution products,” such as Ivy Park and J. Crew.

“As we look ahead, we are focused on speed, convenience and personalization culminating to our most important goal of improving service,” Blake Nordstrom said.

In other Nordstrom news, the “reserve merchandise online and try on in stores” service was tested in six stores and will expand to 50 full-line stores this year.

Nordstrom’s Canada operations contributed $300 million in volume last year, and ultimately could represent $1 billion in revenues, officials said. The company sees up to six full-line stores and 15 to 20 Racks in Canada. (There are just five full-line stores in the country.) The first Rack stores will begin to open next year in Canada.

E-commerce at Nordstrom currently represents one-quarter of the revenues, way up from the 8 percent in 2010.

For 2017, Nordstrom projects earnings per diluted share of $2.75 to $3; total sales growth of 3 to 4 percent, and flat comparable-store sales. Also, in 2017, the company expects to see profitability of its online business cross over to a stronger margin than the store business

To improve the bottom-line performance of the full-line stores, “We’ve got opportunities to adjust our service model more to tailor to how customers want to shop, and to be more efficient with staffing model,” said executive vice president Jamie Nordstrom. The company will introduce a labor scheduling tool to be more efficient with costs.

“We have got some headwinds that we have been experiencing for the last couple of years,” Jamie Nordstrom said. “What we are encouraged by is a move away from a promotional stance. Our industry has been really promotional driven by higher inventories. That’s cleaned up. That’s impacted our results pretty positively. We are selling a larger percentage of sales at regular price. When we can bring in a consistent flow of new merchandise, turn it full price, good things can happen.”

During the call, one analyst asked if President Trump’s tweets criticizing Nordstrom for dropping the Ivanka Trump collection had any impact on business, Pete Nordstrom, copresident, responded, “It was not really discernible one way or the other.”

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