NORDSTROM NET PLUMMETS 60% IN QUARTER

Byline: Jennifer Weitzman

NEW YORK — Declining same-store sales, heavy markdowns and higher expenses drove Nordstrom Inc.’s fourth-quarter profits down 60 percent. The high-end retailer also said it expects first-quarter 2001 and full-year earnings to miss analysts’ current forecasts.
The Seattle-based chain reported net income of $27.1 million, or 20 cents a share, for the quarter ended Jan. 31. That compares with earnings of $66.6 million, or 50 cents, a year earlier. Sales rose 7.5 percent, to $1.66 billion from $1.54 billion a year ago. Comparable-store sales fell 1.9 percent.
Looking ahead, the company said it anticipates first-quarter earnings to come in at 14 to 17 cents a share, compared with the 19 cents Wall Street had expected, and full-year earnings to hit $1.10 to $1.14 a share, compared to the $1.19 consensus.
Women’s apparel comparable-store sales recorded a low-single-digit increase, with the Brass Plum and cosmetics areas reporting high-single-digit increases. However, the men’s business offset those results, falling in the mid-single-digit range.
Same-store inventory was up $85 million, or 13.4 percent, reflecting below-plan sales in men’s and women’s apparel.
The company also said its January same-stores sales declined 1.3 percent, marking the fourth straight monthly decline.
Blake Nordstrom, president, told analysts on a conference call how “disappointed we are with the gross profit results,” but added that growth is an “important ingredient to Nordstrom. We are committed to grow this business.”
He said the declining comps and high markdowns hurt results. Looking ahead, he said he expects the firm’s goal of improving merchandise, executing better inventory plans, stepping up customer service and improving its brand image to help results.
“We are committed to that and doing our best each day to take a step forward and make improvements,” the executive said. “We are not out of woods yet, but we believe we can make the progress we expect and you expect.”
Saying the retailer’s merchandise strategy is the highest form of customer service, he said, “There is no question we have been disappointing customers, but we are excited about opportunities going forward about the merchandise.”
Observers have suggested that Nordstrom’s efforts to include more contemporary clothing to attract more fashion-forward shoppers with its “Reinvent Yourself” campaign have alienated its traditional conservative customer base.
The company has also seen a shakeup at the top recently. Last summer, the Nordstrom family retook full control of the 120-unit chain, with Blake Nordstrom assuming the presidency and Bruce Nordstrom coming out of retirement to serve as chairman.
Jennifer Black, analyst with Wells Fargo Van Kasper, lowered her rating and earnings estimates on Nordstrom because of the company’s significant amount of carry-over inventory that she said could affect gross margins during the first half of the year.
“Nordstrom’s management is making the right decision about their business going forward,” she said in a research note. “But we are still uncertain about the length of time it will take to significantly turn around the business.”
However, she noted there are some divisions, including women’s, already beginning to improve, writing, “By the back half of 2001, we will begin to see the effects of Nordstrom’s operational and merchandise adjustments and that the changes will then continue into 2002.”
The fourth-quarter earnings of 20 cents a share were a penny ahead of Wall Street’s revised expectations — prior to a January warning, the First Call consensus had been for earnings of 38 cents.
For the year, the company’s earnings fell 49.7 percent, to $101.9 million, or 78 cents a share. That compares with 1999 results of $202.6 million, or $1.47 a share. Sales increased 7.4 percent, to $5.53 billion from $5.15 billion. Comps increased 0.3 percent for the year.
Nordstrom shares slipped 56 cents, to $18.91, in Thursday’s trading on the New York Stock Exchange. The firm’s share price is 45.2 percent off from its 52-week high of $34.50, hit in April.

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