Nordstrom Reports First Quarter 2018 Earnings
May. 17, 2018
SEATTLE--(BUSINESS WIRE)--May 17, 2018--Nordstrom, Inc. (NYSE: JWN) today reported earnings per diluted share for the first quarter ended May 5, 2018 of $0.51, compared with the first quarter ended April 29, 2017 of $0.37, which included a debt refinancing charge of $0.06.
Total Company net sales increased 5.8 percent for the first quarter ended May 5, 2018 compared with the quarter ended April 29, 2017. This reflected an increase of approximately 250 basis points primarily due to the shift of a Nordstrom Rewards loyalty event into the first quarter relative to the second quarter last year. Comparable sales for the first quarter ended May 5, 2018 increased 0.6 percent, compared with the 13-week period ended May 6, 2017.
The Company continues to invest in new market opportunities and digital capabilities to drive customer engagement and market share gains. During the quarter, the Company made the following achievements in executing its growth plans:The Company reached a significant milestone in its history with the opening of the Nordstrom Men's Store in New York City. The Company expanded its presence in Canada with the introduction of Nordstrom Rack, opening three stores in the Toronto and Calgary markets. In executing its digital strategy, the Company increased sales enabled through digital capabilities by 18 percent in the first quarter, compared with the same period in 2017. Digitally enabled sales represented 29 percent of first quarter sales, up from 25 percent a year ago. Sales from Nordstrom Rewards customers represented 53 percent of first quarter sales, compared with 47 percent a year ago.
FIRST QUARTER SUMMARYFirst quarter net earnings were $87 million compared with $63 million during the same period in fiscal 2017. Results in 2017 included an interest expense charge of $18 million related to a debt refinancing. Earnings before interest and taxes ("EBIT") were $153 million, or 4.4 percent of net sales, compared with $151 million, or 4.6 percent of net sales, during the same period in fiscal 2017. In Full-price, which consists of Nordstrom U.S. full-line stores, Nordstrom.com, the Canadian operation, Trunk Club, Jeffrey and Nordstrom Local, comparable sales increased 0.7 percent. The top-ranking merchandise categories were Kids' Apparel and Men's Apparel. In Off-price, which consists of Nordstrom U.S. Rack stores, Nordstromrack.com/HauteLook and Last Chance clearance stores, comparable sales increased 0.4 percent. Gross profit, as a percentage of net sales, of 34.1 percent decreased 21 basis points compared with the same period in fiscal 2017. This reflected higher occupancy expenses related to U.S. and Canada Rack openings in addition to planned pre-opening expenses associated with the Nordstrom Men's Store NYC. The Company ended the first quarter in a good inventory position with net sales growth exceeding a decline in inventory. Selling, general and administrative expenses, as a percentage of net sales, of 32.3 percent increased 32 basis points compared with the same period in fiscal 2017, primarily due to planned pre-opening expenses associated with the Nordstrom Men's Store NYC. The Company's rate performance reflected an improvement relative to recent historical trends driven by productivity gains in technology, supply chain and marketing. During the quarter, the Company repurchased 0.3 million shares of its common stock for $13 million. A total capacity of $401 million remains available under its existing share repurchase board authorization. The actual timing, price, manner and amounts of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission ("SEC") rules.
To date in fiscal 2018, the Company opened eight stores and closed one store. The Company opened the following stores in the first quarter of 2018:
FISCAL YEAR 2018 OUTLOOK
The Company updated its annual outlook expectations for earnings per diluted share to incorporate first quarter results. Nordstrom's current expectations for fiscal 2018 are as follows:
The Company’s updated annual outlook expectations incorporated the following assumptions:The shift in the Anniversary Sale event into the second quarter relative to the second and third quarters in 2017 and the adoption of the new revenue recognition guidance is expected to impact total sales percentage by an increase of approximately 150 basis points in the second quarter and a decrease of approximately 150 basis points in the third quarter. Credit card revenues growth in the mid-teens range.
CONFERENCE CALL INFORMATION
The Company's senior management will host a conference call to discuss first quarter 2018 results and fiscal 2018 outlook at 4:45 p.m. Eastern Daylight Time today. To listen to the live call online and view the conference call slides and the speakers' prepared remarks, visit the Investor Relations section of the Company's corporate website at http://investor.nordstrom.com. An archived webcast with the speakers' prepared remarks and the conference call slides will be available in the Quarterly Earnings section for at least one year. Interested parties may also dial 201-689-8354. A telephone replay will be available beginning approximately three hours after the conclusion of the call by dialing 877-660-6853 or 201-612-7415 and entering Conference ID 13679678, until the close of business on May 24, 2018.
Nordstrom, Inc. is a leading fashion retailer based in the U.S. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 373 stores in 40 states, including 122 full-line stores in the United States, Canada and Puerto Rico; 239 Nordstrom Rack stores; two Jeffrey boutiques; two clearance stores; seven Trunk Club clubhouses; and its Nordstrom Local service concept. Additionally, customers are served online through Nordstrom.com, Nordstromrack.com, HauteLook, and TrunkClub.com. Nordstrom, Inc.'s common stock is publicly traded on the NYSE under the symbol JWN.
Certain statements in this news release contain or may suggest "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties including, but not limited to, our anticipated financial outlook for the fiscal year ending February 2, 2019, our anticipated annual total and comparable sales rates, our anticipated new store openings in existing, new and international markets, our anticipated Return on Invested Capital and trends in our operations. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. Our actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to: successful execution of our customer strategy to provide a differentiated and seamless experience across all Nordstrom channels; timely and effective implementation of our plans to evolve our business model, including development of applications for electronic devices, improvement of customer-facing technology, timely delivery of products purchased digitally, enhancement of inventory management systems, greater and more fluid inventory availability between our digital channels and retail store locations, and greater consistency in marketing and pricing strategies, as well as our ability to manage the costs associated with this evolving business model; our ability to evolve our business model as necessary to respond to the business and retail environment, as well as fashion trends and consumer preferences, including changing expectations of service and experience in stores and online; our ability to properly balance our investments in existing and new store locations, especially our investments in our Nordstrom Men's Store NYC and Nordstrom NYC; successful execution of our information technology strategy; our ability to effectively utilize data in strategic planning and decision making; timely completion of construction associated with newly planned stores, relocations and remodels, all of which may be impacted by the financial health of third parties and consumer traffic to the locations; efficient and proper allocation of our capital resources; effective inventory management processes and systems, fulfillment and supply chain processes and systems, disruptions in our supply chain and our ability to control costs; the impact of any systems or network failures, cybersecurity and/or security breaches, including any security breach of our systems or those of a third party provider that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information or compliance with information security and privacy laws and regulations in the event of such an incident; our ability to safeguard our reputation and maintain our vendor relationships; our ability to maintain relationships with and motivate our employees and to effectively attract, develop and retain our future leaders; our ability to realize the expected benefits, respond to potential risks and appropriately manage costs associated with our program agreement with TD; the effectiveness of planned advertising, marketing and promotional campaigns in the highly competitive and promotional retail industry; market fluctuations, increases in operating costs, exit costs and overall liabilities and losses associated with owning and leasing real estate; potential goodwill impairment charges, future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames; compliance with debt covenants and operating covenants, availability and cost of credit, changes in our credit rating and changes in interest rates; the timing, price, manner and amounts of future share repurchases by the Company, if any, or any share issuances by the Company; the impact of the seasonal nature of our business and cyclical customer spending; the impact of economic and market conditions and the resultant impact on consumer spending and credit patterns; the impact of economic, environmental or political conditions in the U.S. and countries where our third party vendors operate; weather conditions, natural disasters, health hazards, national security or other market and supply chain disruptions, or the prospects of these events and the resulting impact on consumer spending patterns or information technology systems and communications; our compliance with applicable domestic and international laws, regulations and ethical standards, including those related to employment and tax, and the outcome of claims and litigation and resolution of such matters; the impact of the current regulatory environment and financial system, health care, and tax reforms; and the impact of changes in accounting rules and regulations, changes in our interpretation of the rules or regulations, or changes in underlying assumptions, estimates or judgments. Our SEC reports, including our Form 10-K for the fiscal year ended February 3, 2018, contain other information on these and other factors that could affect our financial results and cause actual results to differ materially from any forward-looking information we may provide. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances, except as required by law.
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