Nordstrom, the Seattle-based department store, has surpassed Wall Street’s expectations with its latest earnings report. The retailer’s earnings per share came in 25 cents higher than expected, indicating that the company is successfully cutting costs and improving efficiencies. However, Nordstrom issued cautious guidance for the full year, with adjusted earnings per share projected to be between $1.75 and $2.05. Sales are expected to range from a 1% decline to 1% growth compared to the previous year. Despite this conservative outlook, Nordstrom’s CEO, Erik Nordstrom, expressed optimism for the second half of the year, citing solid second-quarter results and continued topline strength.
In the second fiscal quarter, Nordstrom reported earnings per share of 96 cents adjusted, surpassing the anticipated 71 cents. Revenue for the period reached $3.89 billion, slightly below analysts’ expectations of $3.90 billion. Although net income for the quarter decreased compared to the previous year, Nordstrom has seen growth in earnings over the last six months. The company reported a net loss of $67 million in the first half of 2023 but achieved a profit of $83 million during the same period in 2024.
To protect profits amid softening demand and increasing inflation, retailers like Nordstrom have been focusing on improving operations and reducing costs. Nordstrom has prioritized enhancing its supply chain, resulting in faster delivery times for online orders and improved merchandise flow to customers and stores. These improvements have contributed to higher conversion rates and lower return rates. Additionally, Nordstrom has been expanding its off-price banner, Nordstrom Rack, which has experienced strong momentum in recent quarters. Sales at Nordstrom Rack increased by 8.8% and comparable sales grew by 4.1% compared to the same period last year. In contrast, the mainline banner of Nordstrom saw a more modest increase of 0.9% in net sales and comparable sales.
Nordstrom’s focus on Nordstrom Rack is crucial for its ability to compete with off-price giant TJX Cos., the parent company of TJ Maxx and Marshall’s. The off-price sector has been experiencing significant growth, and Nordstrom aims to capture consumers who are still spending but seeking more affordable options. To achieve this, Nordstrom has been opening new Rack locations, with a goal of at least 22 new stores by the end of the year. The company has also been hiring off-price veterans and strengthening its selection of well-known brands.
In conclusion, Nordstrom’s latest earnings report showcases its success in cutting costs and improving efficiencies. Despite cautious guidance for the full year, the company remains optimistic about the second half of 2024. Nordstrom’s focus on Nordstrom Rack and its efforts to enhance the supply chain have been instrumental in driving growth and competing in the off-price sector. By continuously adapting to consumer preferences and offering affordable options, Nordstrom is positioning itself for continued success in a challenging retail landscape.
