A sign outside a Nordstrom Rack retail store in New York on August 25, 2022.
Gabe Jones | Bloomberg | Getty Images
Nordstrom Amazon Web Services Inc. reported earnings Tuesday that beat Wall Street expectations, suggesting the retailer is making significant progress in its efforts to cut costs and boost efficiency.
Although the Seattle-based retailer posted earnings per share that were about 25 cents higher than expected, it issued tepid guidance for the full year.
Nordstrom now expects adjusted earnings per share to be between $1.75 and $2.05, compared with a previous range of $1.65 to $2.05. It expects sales to be between a 1% decline and a 1% increase from the prior year, compared with a previous guidance of a 2% decline and a 1% increase.
In a press release, Nordstrom CEO Eric Nordstrom said the company is optimistic about the second half of the year despite the cautious guidance.
“Our second quarter results were strong, and we are encouraged by the continued strength in revenue across both brands and the progress we are making to expand gross margin and increase profitability,” Nordstrom said. “We are confident in our outlook for the rest of the year and look forward to maintaining the momentum we have built.”
Shares rose about 5% in extended trading.
Here's how the store performed in the fiscal second quarter compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG:
Earnings per share: 96 cents adjusted vs. 71 cents expectedRevenue: $3.89 billion vs. $3.90 billion expected
The company reported net income for the three months ended Aug. 3 of $122 million, or 72 cents a share, compared with $137 million, or 84 cents a share, a year earlier. Excluding one-time items related to supply chain weakness, the company reported adjusted earnings of 96 cents a share.
Sales rose to $3.89 billion, up about 3.4 percent from $3.77 billion a year earlier. Revenue came in slightly below analysts' expectations.
At the company level, comparable sales rose 1.9%, while gross merchandise value rose 3.5%. It is unclear to what extent this increase in gross merchandise value was related to price increases versus volume.
As consumers continue to pull back on discretionary spending in the face of persistent inflation and higher interest rates, retailers are improving operations and cutting costs to protect profits from weak demand.
During the quarter, Nordstrom's earnings fell compared to the same period last year, but earnings have grown over the past six months. Last year, Nordstrom reported a net loss of $67 million in the six months ended July 29, 2023, but in the same period this year, it posted a profit of $83 million.
Nordstrom said it’s been improving its supply chain. Last quarter, it said the time it took for online orders to arrive was 5% faster. It also improved the way goods get to customers and stores, which it said helped drive higher conversion rates and lower return rates.
Another key focus for the company has been growing its discount brand, Nordstrom Rack. Over the past two quarters, momentum has been building at Nordstrom Rack and has helped support the company’s overall results. During the quarter, sales at Nordstrom Rack were up 8.8%, while comparable sales were up 4.1% compared to the same period last year.
That compares to Nordstrom's top line, which saw net sales and comparable sales rise just 0.9%.
Nordstrom has been building more Rack locations and has opened 11 new ones so far this fiscal year, with a goal of opening at least 22 by the end of the year. The focus on Rack has been critical to Nordstrom’s ability to compete with the discount giant TJX CompanyAmazon, which owns TJ Maxx and Marshall's, is working to attract consumers who are still spending money — but are craving cheaper options and deals.
The discounted goods sector has been experiencing tremendous growth for more than a year, but RAK did not capitalize on the beginning of this trend. To reverse the stagnation, the company focused on opening more locations, hiring discounted goods professionals, and increasing its focus on well-known brands.
