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Nordstrom (JWN) Gains as Q1 Earnings & Sales Beat Estimates
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Nordstrom, Inc. (JWN - Free Report) posted first-quarter fiscal 2023 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. The bottom line improved year over year, while the top line declined.
Results benefited from continued progress on its key initiatives, improved trends at Nordstrom Rack, gross margin expansion and supply-chain efficiencies. These were partly offset by the effects of the wind-down of its Canada business.
Nordstrom posted adjusted earnings of 7 cents per share against the year-ago quarter’s loss per share of 6 cents. Earnings per share also surpassed the Zacks Consensus Estimate of a loss of 12 cents.
Total revenues of $3,181 million declined 11.6% year over year but beat the Zacks Consensus Estimate of $3,113 million. Dismal revenues resulted from a 175-basis-point (bps) adverse impact of the wind-down of Canada operations and an 11.9% decline in gross merchandise value ("GMV"). Sales were also hurt by declines across the Nordstrom and Nordstrom Rack banners.
Driven by the robust results, Nordstrom’s shares jumped 6.9% in the after-hours trading session on May 31, 2023. In the past three months, shares of the Zacks Rank #4 (Sell) company have lost 20.9% compared with the industry’s decline of 19.1%.
Image Source: Zacks Investment Research
Quarterly Highlights
Net sales fell 11.6% year over year to $3,064 million but surpassed our estimate of $3,012.8 million. Credit Card net revenues grew 14.7% year over year to $117 million and beat our estimate of $107.4 million.
In first-quarter fiscal 2023, net sales for the Nordstrom banner decreased 11.4% from the year-ago quarter to $2,027 million but surpassed our estimate of $1,990.6 million. GMV declined 11.8% year over year for the Nordstrom banner in the fiscal first quarter. The Nordstrom banner’s net sales included a negative impact of 270 bps related to the wind-down of the Canada operations.
Sales at the Nordstrom Rack banner declined 11.9% year over year to $1,037 million but beat our estimate of $1,022.1 million. The elimination of store fulfillment for Nordstrom Rack digital orders starting from the third quarter of fiscal 2022 hurt the fiscal first-quarter Rack banner net sales by 600 bps.
Digital sales plunged 17.4% year over year in the fiscal first quarter due to the elimination of store fulfillment for Nordstrom Rack digital orders in third-quarter fiscal 2022 and quitting of Trunk Club earlier in fiscal 2022. These actions hurt the fiscal first-quarter digital sales by 800 bps. In the fiscal first quarter, digital sales contributed 36% to net sales.
Nordstrom's gross profit margin expanded 110 bps year over year to 33.8% for the reported quarter, mainly driven by the company’s focus on enhancing inventory productivity.
SG&A expenses, as a percentage of sales, increased 240 bps to 36%. Adjusted SG&A expense rate rose 120 bps due to deleverage from lower sales, offset by improved variable costs from supply-chain efficiency initiatives. Adjusted SG&A expenses excluded 120 bps related to a gain on the sale of the company's interest in a corporate office building and an impairment charge related to costs associated with the wind-down of Trunk Club in the first quarter of fiscal 2022.
Adjusted earnings before interest and taxes (EBIT) of $50 million rose 56.3% year over year in the fiscal first quarter. The adjusted EBIT margin expanded 70 bps in the fiscal first quarter to 1.6%.
Other Financials
Nordstrom ended first-quarter fiscal 2023 with available liquidity of $1.4 billion, including $581 million of cash and cash equivalents, and $800 million available on its revolving credit facility. The company had long-term debt (net of current liabilities) of $2,608 million and total shareholders’ equity of $551 million as of Apr 29, 2023.
As of Apr 29, 2023, JWN’s net cash provided for operating activities was $16 million. The company spent $106 million toward capital expenditure in the first quarter of fiscal 2023.
Nordstrom recently approved a dividend of 19 cents, payable Jun 14, to its shareholders of record as of May 30.
Outlook
Nordstrom is focused on enhancing customer experience, improving the Nordstrom Rack performance, increasing inventory productivity and progressing on its supply-chain optimization initiatives. The company is confident of the strength of its brands, and its ability to drive profitable growth and deliver long-term value to shareholders.
Management provided its outlook for fiscal 2023, including the 53rd week and the expected impact of the wind-down of Canada operations. JWN anticipates total revenues to decline 4-6% year over year in fiscal 2023. Revenues are expected to include a 250-bps impact of the closing of the Canada operations and a nearly 130-bps gain from the 53rd week.
The EBIT margin is expected to be 1.5-2% of sales, including the impacts of the charges related to the closing of the Canada business. The adjusted EBIT margin is likely to be 3.7-4.2% of sales.
The company predicts an income tax rate of 6% for fiscal 2023, including a 2,100-bps impact of the one-time charges for the Canada business wind-down. Adjusted earnings are envisioned to be $$1.80-$2.20 per share, excluding the charges related to the Canada business wind-down. Earnings per share, including the wind-down-related charges, are expected to be 60 cents to $1.00. The company’s earnings guidance excludes any potential share repurchase.
Stocks to Consider
Here are three better-ranked stocks to consider, namely Abercrombie & Fitch (ANF - Free Report) , Urban Outfitters (URBN - Free Report) and The TJX Companies (TJX - Free Report) .
The Zacks Consensus Estimate for Abercrombie’s fiscal 2023 sales and earnings suggests growth of 3.1% and 604%, respectively, from the year-ago period’s reported levels. ANF has a trailing four-quarter earnings surprise of 480.6%, on average.
Urban Outfitters currently flaunts a Zacks Rank of 1. URBN’s expected EPS growth rate for three to five years is 18%. Shares of URBN have improved 11.2% in the past three months.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year revenues and EPS suggests growth of 4.9% and 53.7%, respectively, from the year-ago reported figures. URBN has a trailing four-quarter negative earnings surprise of 12.2%, on average.
TJX Companies currently carries a Zacks Rank #2 (Buy). TJX has an expected EPS growth rate of 10.5% for three to five years. Shares of TJX have risen 0.1% in the past three months.
The Zacks Consensus Estimate for TJX Companies’ current financial-year revenues and EPS suggests growth of 6.5% and 15.1%, respectively, from the year-ago reported figures. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.
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Nordstrom (JWN) Gains as Q1 Earnings & Sales Beat Estimates
Nordstrom, Inc. (JWN - Free Report) posted first-quarter fiscal 2023 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. The bottom line improved year over year, while the top line declined.
Results benefited from continued progress on its key initiatives, improved trends at Nordstrom Rack, gross margin expansion and supply-chain efficiencies. These were partly offset by the effects of the wind-down of its Canada business.
Nordstrom posted adjusted earnings of 7 cents per share against the year-ago quarter’s loss per share of 6 cents. Earnings per share also surpassed the Zacks Consensus Estimate of a loss of 12 cents.
Total revenues of $3,181 million declined 11.6% year over year but beat the Zacks Consensus Estimate of $3,113 million. Dismal revenues resulted from a 175-basis-point (bps) adverse impact of the wind-down of Canada operations and an 11.9% decline in gross merchandise value ("GMV"). Sales were also hurt by declines across the Nordstrom and Nordstrom Rack banners.
Driven by the robust results, Nordstrom’s shares jumped 6.9% in the after-hours trading session on May 31, 2023. In the past three months, shares of the Zacks Rank #4 (Sell) company have lost 20.9% compared with the industry’s decline of 19.1%.
Image Source: Zacks Investment Research
Quarterly Highlights
Net sales fell 11.6% year over year to $3,064 million but surpassed our estimate of $3,012.8 million. Credit Card net revenues grew 14.7% year over year to $117 million and beat our estimate of $107.4 million.
In first-quarter fiscal 2023, net sales for the Nordstrom banner decreased 11.4% from the year-ago quarter to $2,027 million but surpassed our estimate of $1,990.6 million. GMV declined 11.8% year over year for the Nordstrom banner in the fiscal first quarter. The Nordstrom banner’s net sales included a negative impact of 270 bps related to the wind-down of the Canada operations.
Nordstrom, Inc. Price, Consensus and EPS Surprise
Nordstrom, Inc. price-consensus-eps-surprise-chart | Nordstrom, Inc. Quote
Sales at the Nordstrom Rack banner declined 11.9% year over year to $1,037 million but beat our estimate of $1,022.1 million. The elimination of store fulfillment for Nordstrom Rack digital orders starting from the third quarter of fiscal 2022 hurt the fiscal first-quarter Rack banner net sales by 600 bps.
Digital sales plunged 17.4% year over year in the fiscal first quarter due to the elimination of store fulfillment for Nordstrom Rack digital orders in third-quarter fiscal 2022 and quitting of Trunk Club earlier in fiscal 2022. These actions hurt the fiscal first-quarter digital sales by 800 bps. In the fiscal first quarter, digital sales contributed 36% to net sales.
Nordstrom's gross profit margin expanded 110 bps year over year to 33.8% for the reported quarter, mainly driven by the company’s focus on enhancing inventory productivity.
SG&A expenses, as a percentage of sales, increased 240 bps to 36%. Adjusted SG&A expense rate rose 120 bps due to deleverage from lower sales, offset by improved variable costs from supply-chain efficiency initiatives. Adjusted SG&A expenses excluded 120 bps related to a gain on the sale of the company's interest in a corporate office building and an impairment charge related to costs associated with the wind-down of Trunk Club in the first quarter of fiscal 2022.
Adjusted earnings before interest and taxes (EBIT) of $50 million rose 56.3% year over year in the fiscal first quarter. The adjusted EBIT margin expanded 70 bps in the fiscal first quarter to 1.6%.
Other Financials
Nordstrom ended first-quarter fiscal 2023 with available liquidity of $1.4 billion, including $581 million of cash and cash equivalents, and $800 million available on its revolving credit facility. The company had long-term debt (net of current liabilities) of $2,608 million and total shareholders’ equity of $551 million as of Apr 29, 2023.
As of Apr 29, 2023, JWN’s net cash provided for operating activities was $16 million. The company spent $106 million toward capital expenditure in the first quarter of fiscal 2023.
Nordstrom recently approved a dividend of 19 cents, payable Jun 14, to its shareholders of record as of May 30.
Outlook
Nordstrom is focused on enhancing customer experience, improving the Nordstrom Rack performance, increasing inventory productivity and progressing on its supply-chain optimization initiatives. The company is confident of the strength of its brands, and its ability to drive profitable growth and deliver long-term value to shareholders.
Management provided its outlook for fiscal 2023, including the 53rd week and the expected impact of the wind-down of Canada operations. JWN anticipates total revenues to decline 4-6% year over year in fiscal 2023. Revenues are expected to include a 250-bps impact of the closing of the Canada operations and a nearly 130-bps gain from the 53rd week.
The EBIT margin is expected to be 1.5-2% of sales, including the impacts of the charges related to the closing of the Canada business. The adjusted EBIT margin is likely to be 3.7-4.2% of sales.
The company predicts an income tax rate of 6% for fiscal 2023, including a 2,100-bps impact of the one-time charges for the Canada business wind-down. Adjusted earnings are envisioned to be $$1.80-$2.20 per share, excluding the charges related to the Canada business wind-down. Earnings per share, including the wind-down-related charges, are expected to be 60 cents to $1.00. The company’s earnings guidance excludes any potential share repurchase.
Stocks to Consider
Here are three better-ranked stocks to consider, namely Abercrombie & Fitch (ANF - Free Report) , Urban Outfitters (URBN - Free Report) and The TJX Companies (TJX - Free Report) .
Abercrombie currently sports a Zacks Rank #1 (Strong Buy). Shares of ANF have rallied 9.4% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie’s fiscal 2023 sales and earnings suggests growth of 3.1% and 604%, respectively, from the year-ago period’s reported levels. ANF has a trailing four-quarter earnings surprise of 480.6%, on average.
Urban Outfitters currently flaunts a Zacks Rank of 1. URBN’s expected EPS growth rate for three to five years is 18%. Shares of URBN have improved 11.2% in the past three months.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year revenues and EPS suggests growth of 4.9% and 53.7%, respectively, from the year-ago reported figures. URBN has a trailing four-quarter negative earnings surprise of 12.2%, on average.
TJX Companies currently carries a Zacks Rank #2 (Buy). TJX has an expected EPS growth rate of 10.5% for three to five years. Shares of TJX have risen 0.1% in the past three months.
The Zacks Consensus Estimate for TJX Companies’ current financial-year revenues and EPS suggests growth of 6.5% and 15.1%, respectively, from the year-ago reported figures. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.