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Despite its resilience in a complicated environment<\/strong><\/b> for American department stores, against a backdrop of falling purchasing power, Nordstrom is not claiming victory.<\/strong><\/b><\/p>\n <\/p>\n The group, owner of the eponymous department store chain and Rack discounter<\/strong><\/b>, may have posted a second quarter ending August 3 that exceeded Wall Street expectations<\/strong><\/b>, but it continues to make cautious forecasts for the full 2024 financial year.<\/p>\n <\/p>\n Nevertheless, its quarterly performance<\/strong><\/b> was welcomed by the stock market<\/strong><\/b>, with its shares rising by around 5%<\/strong><\/b> on the day the results were published, August 27.<\/p>\n <\/p>\n <\/p>\n It’s true that Nordstrom has managed to stay in the saddle<\/strong><\/b> when competitors such as Lord & Taylor and Barneys<\/strong><\/b> have gone bankrupt in recent years, and are sometimes on the verge of being bought out (like Neiman Marcus<\/strong><\/b> in the sights of HBC, owner of Saks Fifth Avenue and…Amazon!<\/strong><\/b>). Nordstrom, on the other hand, has managed to reinvent itself<\/strong><\/b> by focusing on its Rack off-price brand<\/strong><\/b> rather than on luxury goods, which are currently poorly oriented, and by optimizing its organization and cutting costs.<\/p>\n\n <\/p>\n Overall, Nordstrom’s net sales rose by 3.4%<\/strong><\/b> to $3.89 billion in the second quarter compared with the same period in fiscal 2023, while its comparable sales increased by 1.9%.<\/strong><\/b><\/p>\n <\/p>\n On theearnings<\/strong><\/b> front, Nordstrom pleasantly surprised Wall Street.<\/strong><\/b> During the quarter, the Group’s net profit did indeed fall<\/strong><\/b> year-on-year, to $122 million from $137 million a year earlier.<\/p>\n <\/p>\n But its adjusted earnings per share -96 cents<\/strong><\/b> (excluding exceptional items linked to supply chain depreciation) – exceeded the<\/strong><\/b> average of 71 cents<\/strong><\/b> expected by analysts.<\/p>\n <\/p>\n <\/p>\n More importantly, Nordstrom returned to the green in the first half of the year<\/strong><\/b>. Whereas it posted a net loss of $67 million in the six months to July 29, 2023, it made a profit of $83 million<\/strong><\/b> in the first six months of the current fiscal year.<\/p>\n <\/p>\n In more detail, sales growth was driven by Nordstrom Rack sales (+8.8% and +4.1% on a comparable basis)<\/strong><\/b>, while its historic<\/strong><\/b> full-price Nordstrom banner<\/strong><\/b> virtually stagnated (+0.9% in both cases)<\/strong><\/b>. The inflationary context is encouraging American consumers to prefer low-price brands.<\/p>\n <\/p>\n The Group opened 11 new Rack stores in the United States<\/strong><\/b> in the first half, and plans to open at least 22<\/strong><\/b> by the end of the year. At the end of the second quarter, the Rack<\/strong><\/b> network comprised 269 units<\/strong><\/b>. Meanwhile, the Nordstrom<\/strong><\/b> network has been reduced by one store<\/strong><\/b> since the beginning of the year, to a total of 93<\/strong><\/b>.<\/p>\n <\/p>\n By stepping up its presence in low-price retailing, Rack is catching up<\/strong><\/b> with competitors such as TJ Maxx and Marshall’s<\/strong><\/b>, which have been active in this highly profitable segment since 2023. According to the press, it has also recruited experienced profiles in this niche.<\/p>\n <\/p>\n <\/p>\n Nordstrom also made good progress in e-commerce<\/strong><\/b>, with digital sales up 6.2%<\/strong><\/b> year-on-year. The Group’s investments in its online platforms and omnichannel customer experience are bearing fruit: digital sales accounted for 37% of sales<\/strong><\/b> in the second quarter.<\/p>\n <\/p>\n In terms of products, the most successful categories in the second quarter were women’s wear, beauty and children’s wear.<\/strong><\/b><\/p>\n <\/p>\n To enhance customer satisfaction, the Group is focusing on improving its logistics<\/strong><\/b>. Delivery times for online orders were accelerated by 5%<\/strong><\/b> in the second quarter, while improvements to the way goods are delivered to customers and stores helped reduce return rates and improve conversion rates.<\/strong><\/b><\/p>\n <\/p>\n More generally, the Group pointed out that the advancement this year of its anniversary sale,<\/strong><\/b> with only one day falling in the third quarter of 2024 compared with eight days in 2023, had a positive impact on<\/strong><\/b>second-quarter net sales across all channels. Beauty, activewear and Home<\/strong><\/b> were the most buoyant departments during this promotional operation.<\/p>\n <\/p>\n <\/p>\n All this prompted Nordstrom CEO Erik Nordstrom<\/strong><\/b> to make some rather optimistic<\/strong><\/b> statements.<\/p>\n <\/p>\n \u201cOur second-quarter results are solid, and we are encouraged by the continued strength of our sales in both formats<\/strong><\/b> and the progress we are making to increase gross margin and profitability,\u201d he stressed in a press release. He and his teams said they were \u201cconfident in our prospects<\/strong><\/b> for the rest of the year\u201d and \u201clooking forward to building on the momentum we have created.\u201d<\/p>\n <\/p>\n The company has updated its financial outlook<\/strong><\/b> for the full year 2024. It now expects a revenue range, including<\/strong><\/b>retail sales andcredit<\/strong><\/b> card revenues, of between a 1% decline and a 1% increase<\/strong><\/b>, and like-for-like sales growth of between 1% and 2%.<\/strong><\/b><\/p>\n <\/p>\n <\/p>\n EBIT margin should be between 3% and 3.4% of sales, and adjusted EBIT margin between 3.6% and 4% of sales. Finally, adjusted earnings per share should be between $1.75 and $2.05.<\/strong><\/b><\/p>\n <\/p>\n Last March<\/strong><\/b>, when it published its annual results, the Group had been even more cautious, forecasting annual growth for 2024 of between -2% and +1% and adjusted earnings per share of between 1.65 and 2.05 dollars.<\/strong><\/b><\/p>\n <\/p>\nReinventing itself<\/h2>\n
Back in the green<\/h2>\n
Progress in e-commerce<\/h2>\n
Solidity<\/h2>\n
More optimistic than in March<\/h2>\n
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