Nordstrom, getting a lift from lower corporate taxes, reported that its fourth-quarter net earnings rose to $248 million compared with $151 million during the same period in fiscal 2017.
Nevertheless, executives were disappointed by the outcome in earnings before interest and taxes, which slipped to $333 million in the period ended Feb. 2, 2019, compared with $350 million for the same period in fiscal 2017.
They were also disappointed by trends in the full-line business and in particular most of the women’s business, which slowed abruptly in the fourth quarter, but said they were able to manage expenses and inventories well to deal with the issues and planning incremental savings of $150 million to $200 million this year.
Nordstrom is also promising better profits in 2019, projecting per-share earnings of between $3.65 and $3.90, compared to the $3.32 reported for 2018. Nordstrom expects modest sales growth this year of 1 to 2 percent.
Net revenues came to $4.48 billion versus $4.7 billion in the year-ago quarter. Full-price comparable sales decreased 1.6 percent, primarily driven by softer traffic trends in full-line stores, while off-price sales showed continued momentum with a comp-sales increase of 4 percent. Comparable sales overall increased 0.1 percent.
Gross profit as a percentage of net sales slipped 33 basis points to 35.1 percent primarily due to higher markdowns in response to softer full-price sales trends and an elevated promotional environment.
The company said its earnings were generally in line with the updated expectations provided in its holiday sales release on Jan. 15.
Copresident Erik Nordstrom said during a conference call with analysts and investors Thursday that the Seattle-based retailer has “the right strategies” in place, though he acknowledged, “We are not satisfied with our results. We missed our objective of increased profit growth and we are focused on getting back on track with profitability goals.”
“It was a bit abrupt in terms of what happened in women’s,” added Pete Nordstrom, copresident and Erik’s brother. “It was somewhat unusual in that happened across the board. It is troubling, but we got really good information about what’s working and what’s not.
“We had to take our inventory levels down (and) edited about 10 percent of brands in women’s,” Pete said. “That gives us increased open-to-buy in brands that are working. Topshop is really strong.” That would suggest possibly reexamining the flow of fashion product in certain cases and “a price sensibility” among certain customers, Pete said. “There are some indicators there that should help us as we continue to work through this.”
Erik Nordstrom opened the conference call by commenting on the passing of his brother Blake in January who was also a copresident. “It’s a painful and difficult time for our family and company. Blake’s impact was immeasurable. He loved this business and was so good at it. Blake was the most genuine person I’ve ever known. His authenticity made real connections with people inside and outside the company. We worked closely together. We miss Blake terribly, but we are inspired by his example. We will be keeping his legacy alive by being the best retailers we can be, particularly Pete and I.”
During 2018, Nordstrom launched its local market strategy, which drove outsize market-share gains in Los Angeles providing increased product selection, delivery speed and convenience for customers. Nordstromrack.com/HauteLook exceeded $1 billion in sales, and Trunk Club delivered sales growth of 35 percent and is on track to reach its market potential of $500 million. The company opened its first freestanding men’s store, in New York, and furthered its Canada expansion with six Nordstrom Rack openings.
Full-year net earnings were $564 million compared with $437 million for 2017, due to primarily lower income tax expenses, but EBIT was $837 million compared with $926 million in 2017. Full-price comparable sales increased 0.9 percent; off-price comps increased 3.5 percent. Total revenues came to $15.86 billion versus $15.48 billion in 2017.
Executives also expect their strategy of forming exclusive brand partnerships with emerging, digitally native and established brands, which have included Birkenstock, Madewell, Allbirds and Something Navy, accelerating this year.
Two key priorities cited were advancing the local market strategy and the Nordie Club loyalty program.
In October, Nordstrom opens its Manhattan women’s flagship. “The flagship will be the biggest and best statement of the Nordstrom brand in one of the world’s top markets,” said Pete Nordstrom.