Nordstrom has exceeded expectations for its third-quarter earnings, providing investors with optimistic guidance for the upcoming months. The retail giant reported revenue growth alongside improved sales across its various departments, giving momentum as the holiday shopping season approaches.
On Tuesday, Nordstrom announced its quarterly earnings, noting about four percent revenue growth year-over-year. The boost was largely attributed to increased purchases of clothing, shoes, and activewear, both at its flagship stores and through its off-price chain, Nordstrom Rack. Online retailers also noted improved sales, making e-commerce account for roughly one-third of Nordstrom's total sales.
CEO Erik Nordstrom expressed satisfaction with the results during the earnings call, highlighting the positive reception of women’s apparel and activewear, which saw sales rise significantly compared to last year. “Our customers have a lot of choices, and our results give us encouragement,” he said. He noted the company’s commitment to enhancing customers’ shopping experiences as they move forward.
Despite these positive results, Nordstrom has chosen to adopt a cautious approach for the upcoming holiday period. The company has slightly upgraded its full-year revenue guidance from previously expected declines to now projecting flat growth or up to 1% increase. This change reflects optimism without overly overextending, especially as the pressure remains on many retailers to focus on value and price sensitivity among consumers.
During the calls, analysts noted the tricky balance between celebrating successful quarters and outlining the potential risks as the retail market remains unpredictable. Recent reports from competitors suggested shoppers are becoming more discerning, prioritizing needs over wants, which puts discretionary spending under strain.
Nordstrom reported net income of $46 million, or 27 cents per share, for the third quarter, compared to $67 million, or 41 cents per share, during the same period last year. After adjusting for one-off expenses related to accelerated technology depreciation, the retailer's adjusted earnings per share were reported at 33 cents, beating analyst forecasts.
The Seattle-based retailer also managed to maintain comparable sales growth of 4% across its brands, which easily surpassed analyst expectations of modest gains during this period. This uptick was especially significant considering it followed the company’s typical Anniversary Sale, which experienced shifts due to calendar differences this year.
Meanwhile, competitors like Macy’s and Best Buy have reported declines, leading to questions about Nordstrom's strategy as other retailers struggle. For the third quarter, Macy's saw its sales drop 2.4%, highlighting the challenges facing even well-known department stores as they navigate changing consumer habits.
One possible edge for Nordstrom has been its off-price segment at Nordstrom Rack, which has recently enjoyed success alongside the flagship brand. This third-quarter data showed comparable sales were on par among both banners, with the main store performing slightly above the Rack. The management noted the opening of 23 new Nordstrom Rack locations this year, with plans for more, which indicates continued growth potential for the brand.
Erik Nordstrom mentioned the enhancements made to the Nordstrom website, including improved search functionalities and targeted product offerings under $100, which have supported online growth significantly. The company’s multi-pronged strategy aims to captivate customers both online and offline, keeping them engaged and returning for repeat purchases.
Despite concerns about softening sales trends observed near the end of October, which company leadership acknowledged during the calls, they remained optimistic about revitalizing their sales through scheduled holiday promotions and events. Nordstrom emphasized its focus on customer engagement and retaining positive momentum through continued investment in the shopping experience.
On the backdrop of these financial improvements, Nordstrom has been the subject of renewed interest from investors after the founding family made headlines earlier this year by proposing to take the company private yet again. Since then, there's been speculation around the potential for significant shifts within the company structure, reflecting confidence from its founders about the long-term stability and growth potential of the brand.
The retail space remains incredibly competitive, and with Nordstrom's proactive measures, it stands out due to its sustained revenue increase and strategic insights, aiming to weather the challenging retail environment through innovation and focused messaging aimed at its customers.
