Nordstrom reports plummeting first-quarter earnings, sets date for NY flagship opening
Seattle-based department store retailer Nordstrom, Inc. posted disappointing first-quarter results on Tuesday, as slipping sales were compounded by mounting costs, resulting in significantly reduced profits.
For the first quarter ended May 4, 2019, Nordstrom’s net earnings were $37 million ($0.23 per diluted share), down from $87 million ($0.51 per diluted share) in the same period in the previous year.
This reduction in the company’s profit largely came down to declines in net sales, which fell 3.5% from $3.47 billion in the first quarter of 2018 to $3.35 billion.
This decrease was, in turn, mainly driven by Nordstrom’s full-price channel, which saw net sales decrease 5.1% year over year, while in the retailer’s off-price channel net sales fell 0.6%.
As a percentage of net sales, the company’s selling, general and administrative expenses also increased 168 basis points to 34%.
The retailer’s digital sales, however, were something of a bright spot, growing 7% to account for 31% of Nordstrom’s overall business.
“While we expected softer trends from the fourth quarter to continue into the first quarter, we experienced a further deceleration. We had executional misses with our customers, and we’re committed to better serving them. This is well within our control to turn around,” said the company’s co-president, Erik Nordstrom, in a release.
“The strength of our inventory and expense execution helped mitigate a meaningful portion of our sales miss. We ended the quarter with inventories in solid shape, and our financial position remains strong. We’re actively taking steps to drive our top-line, and we’re focused on delivering on our financial goals,” he added, seeking to reassure stockholders.
Seemingly with a similar objective, Nordstrom’s press release also outlined a number of strategic initiatives currently being implemented at the company, including investments in digital marketing and efforts to correct executional issues with the retailer’s new loyalty program, rebalance merchandise assortment, curb expenses and scale its local market strategy.
Nordstrom’s assurances were not, however, enough to prevent shares in the company taking a dive of 10% late on Tuesday following the announcement of its results.
In line with its disappointing performance in the first quarter, Nordstrom reported that it has revised its annual outlook for fiscal 2019. Net sales, which were previously expected to increase between 1% and 2%, are now predicted to fall up to 2% or remain flat. Diluted EPS is now expected to total $3.25 to $3.65, compared to a previous outlook of $3.65 to $3.90.
The company also announced that it will be opening its much-anticipated New York City flagship on October 24. Located at 225 West 57th Street, the 320,000-square-foot store will offer a range of services and digital experiences, and feature an eye-catching waveform glass façade designed by James Carpenter Design Associates.
Plans for a Nordstrom store in New York have existed since 2012 and last year the retailer opened its first men’s flagship in the city – a smaller 47,000-square-foot store located just across the road from where its full-line sister will be opening its doors later this year.
The October opening will be followed by the launch of two new Nordstrom Local service hubs this fall, as the company pushes forward with its expansion in the city.
Along with its full-line Nordstrom stores, the company also runs a variety of different retail and service locations under the Nordstrom Rack, Jeffrey, Trunk Club and Nordstrom Local banners.
Having opened three stores over the course of the first quarter, closed two and relocated one, Nordstrom currently operates 380 locations under its different brand names in the US and Canada.
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