NEW YORK — Nordstrom Inc. is back in the fast lane, building its bottom line even more rapidly than sales.
This story first appeared in the November 21, 2003 issue of WWD. Subscribe Today.
The Seattle-based better department store chain could seemingly do no wrong in the third quarter as it more than doubled its profits on robust overall and same-store sales growth.
For the three months ended Nov. 1, the firm said net income skyrocketed 146.8 percent to $45.5 million, or 33 cents a diluted share, which shot past the Wall Street consensus estimate by 11 cents. That compares to last year’s earnings of $18.4 million, or 14 cents.
Net sales for the period grew 7.4 percent to $1.42 billion from $1.32 billion a year ago, and comparable-store sales increased an above-plan 5 percent.
At the other end of the performance spectrum, Dillard’s Inc. reported that its net loss for the third quarter ended Nov. 1 more than tripled to $15.8 million, or 19 cents a diluted share, from $5.1 million, or 6 cents, in the year-ago quarter. The loss, however, was 14 cents less than analysts had projected. Sales slipped 1.7 percent to $1.76 billion from $1.79 billion, while comps declined 2 percent.
But at Nordstrom, the strong sales improvement, as well as fewer markdowns, allowed the store to leverage a 180 basis-point improvement in gross margin and a 110 basis-point reduction in selling, general and administrative costs. Taken together, the greater efficiency accounted for the large disparity between bottom- and top-line growth.
“The results of the past two quarters are exactly the kind of performance we hoped to attain,” said president Blake Nordstrom on a conference call with analysts. In the previous quarter, Nordstrom’s profits and sales increased 81.3 percent and 8.4 percent, respectively, and comps were up 3.9 percent.
“Driving volume has been a key area for us and our comp-store trends attest to that focus,” he continued. “It is gratifying to see our two- and three-year comp trends be both positive and improving.”
Indeed, Nordstrom has comped up for six straight months, and the outlook for November is a 2 to 4 percent same-store sales increase. Moreover, Nordstrom has benefited from comp growth across all markets and a wide selection of merchandise categories.
“Geographically, all of our regions posted positive comp-store increases,” said chief financial officer Michael Koppel on the call. “The strongest performing categories were cosmetics, accessories, women’s active apparel, women’s designer apparel, men’s wear and shoes.”
Koppel added that the lower SG&A expenses “reflected progress sustaining a higher level of spending discipline.”
As for ongoing speculation that Nordstrom may be intent on acquiring some of the 32 Lord & Taylor stores being exited by May Department Stores Co., Peter Nordstrom, president of the full-line stores, said, “We’re interested and we’re looking around a bit but we’re not really at liberty to talk about it.”
He added that the firm was considering four or five locations at the most.
Looking ahead, Nordstrom expects fourth-quarter earnings per share of 54 to 58 cents. For the full-year, Nordstrom now forecasts EPS of $1.55 to $1.59, higher than the guidance it issued at second quarter’s end of $1.33 to $1.37. The outlook for full-year comps is an increase of 1 to 3 percent.
Overall, for the first nine months of the fiscal year, Nordstrom said profits more than quadrupled, soaring 358.7 percent to $138.5 million, or $1.01, from $30.2 million, or 22 cents, a year ago. Excluding special items in the year-ago period, net income would have increased a more modest 36.9 percent from $101.2 million, or 75 cents. Sales rallied 7.9 percent to $4.56 billion from $4.22 billion while comps picked up 2.6 percent.
Earnings were released after the market closed, but Nordstrom shares rose $1.30, or 4.3 percent, during the day Thursday to close at $31.82 in New York Stock Exchange trading.
Dillard’s shares were up 4 cents, or 0.3 percent, to $14.50 in Thursday’s NYSE session but leaped in after-hours trading. The firm didn’t conduct a conference call, but did acknowledge in its earnings statement that third-quarter sales were led by cosmetics, accessories, shoes, lingerie and men’s wear, with women’s wear and juniors’ in line with company results and children’s and home falling below average.
For the year to date, Dillard’s loss shrank to $41.8 million, or 50 cents a share, versus a year-ago loss of $470.6 million, the result of an accounting change that subtracted $530.3 million from the bottom line. Sales fell 4 percent to $5.3 billion from $5.52 billion.