Nordstrom Inc., showing progress in its strategic initiatives, reported a big boost in fourth-quarter earnings to $200 million from $33 million in the year-ago period.
Sales for the quarter ended Jan. 29, 2022 rose 23 percent to $4.38 billion versus $3.55 billion in the same period in fiscal 2020, and decreased 1 percent versus the same period in fiscal 2019.
The company went into the black for all of fiscal 2022, with a profit of $178 million versus a loss of $690 million in 2020, which was heavily impacted by the pandemic. Net earnings for the latest fiscal year included an $88 million debt refinancing charge.
Nordstrom’s stock price spiked 35 percent, or $6.87, to $26.41 after the market closed Tuesday, due to the robust earnings report as well as the retailer’s optimistic forecast for the year ahead, including retail sales and credit card revenues, of 5 to 7 percent versus fiscal 2021. In addition to strategic moves, executives said growth should be fueled by wage and employment increases in the U.S., and a continuing return to travel, in-person social events and the office.
“We advanced our strategic initiatives this quarter, with sequential sales improvement, strong digital growth and a significant increase in profitability,” said Erik Nordstrom, chief executive officer of Nordstrom Inc. “Our team continues to work with urgency to accelerate our progress and invest in our capabilities to better serve customers and profitably grow sales. Our primary focus is on three areas: improving Nordstrom Rack performance, increasing profitability and optimizing our supply chain and inventory flow. Our progress has given us line of sight to achieve in the coming year the financial targets we presented at our 2021 investor event.”
“We drove a significant increase in merchandise margin this quarter, as we engaged customers through our compelling and expanded holiday gift offering, while also reducing promotional activity,” added Pete Nordstrom, Nordstrom’s president and chief brand officer. “Looking ahead, we are focused on more effectively balancing inventory with demand while increasing efficiency throughout our network and delivering newness and selection to our customers.”
Nordstrom had been sluggish for awhile, and acknowledged some merchandise and pricing misses in past quarters, but is apparently making progress for a variety of reasons, including robust investments in digital; new kinds of brand partnerships such as with Open Edit, Fanatics and Asos; growing omni-channel capabilities, including its local market strategy, which involves leveraging its physical store assets, and superior service offerings such as in-store sales help, speedy deliveries and pickup of online stores at stores, across its regular, off-price and online channels.
Last quarter, Nordstrom banner net sales were flat and gross merchandise value increased 2 percent compared with the fourth quarter of 2019.
Net sales for Nordstrom Rack decreased 5 percent versus the fourth quarter of fiscal 2019, a sequential improvement of 320 basis points over the third quarter. Last quarter, the company undertook a thorough analysis of Rack and came up with a plan including trying to retrieve more merchandise from top brands, increasing the delivery flow, increasing pack and hold merchandise, strengthening brand awareness. The new plan is in its early stages, according to Erik.
Sales in the home, active, designer, beauty and kids categories had the strongest growth compared with the fourth quarter of 2019. “Apparel and shoes are not quite back to 2019 levels but recovering,” said Pete, who added that dresses, men’s sportswear and outerwear, and women’s shoes are seeing improving sales trends. He also said the company is data-driven and customer centric when it comes to optimizing the assortments at Nordstrom and Rack, and that Nordstrom has an opportunity to “lean into denim as more of a destination category.” In April, there will be a heightened marketing focus on denim, he said.
Geographically, Nordstrom banner sales in the Southern markets, including Southern California, outperformed the Northern markets by approximately 7 percentage points. Suburban stores continued to be stronger than urban stores in the fourth quarter. Urban stores have been impacted by the flight to the suburbs due to COVID-19 and depressed tourism.
Nordstrom’s improvements were in part attributed to unique merchandise partnerships and significant increases in product to the assortment, with more than 300 brands launched during the year. Alternative vendor partnership models accounted for 10 percent of Nordstrom banner gross merchandise value in the fourth quarter, up from 7 percent in 2019.
The Seattle-based retailer also navigated global supply chain disruptions throughout the quarter by accelerating receipts and investing in improved in-stock levels. Inventory levels at the end of the quarter were higher than planned, but the company expects to reduce its inventory relative to sales during the first quarter of fiscal 2022.
Nordstrom’s outlook for earnings before interest and taxes is for 5.6 to 6 percent of sales, and for earnings per share of $3.15 to $3.50, excluding the impact of share repurchase activity, if any.
Nordstrom operates a total 350 Nordstrom, Nordstrom Local and Nordstrom Rack stores, as well as the Nordstrom and Nordstrom Rack websites and apps.