Analysts upbeat despite Nordstrom Q4 profit drop
- Analysts optimistic about Nordstrom's long-term outlook
- Q4 profit falls 4.9% to $255m
- Sales up 9% to $3.9bn
Analysts remain upbeat about Nordstrom's long-term outlook
Ongoing expansion and investment costs weighed on fourth-quarter profit and margins at Nordstrom, but analysts remain upbeat about the impact this will have on the upscale fashion retailer going forward.
Net earnings slipped to US$255m for the three months to 31 January, compared to $268m in the same period of the prior year.
Sales, meanwhile, increased 9% to $3.9bn from $3.6bn last year, while comparable store sales rose 4.7%. Sales at full-line stores climbed 1.2%, and online sales grew 19%. Nordstrom Rack saw sales increase 17%, largely thanks to the opening of 27 new stores since the same period of last year.
Gross profit margin declined 53 basis points to 36.7%, primarily due to increased markdowns at Nordstrom Rack. Costs related to the acquisition of Trunk Club and ongoing technology and fulfilment investments saw selling, general and administrative expenses increase 13.5% to $1.08bn.
During the full year, net earnings fell 1.9% to $720m from $734m in the year before, while sales were up 7.8% to $13.1bn from $12.2bn.
Although Nordstrom said it will continue to invest and build on its earnings and profit, the retailer expects losses for its ongoing expansion into Canada to be around $60m in fiscal 2015.
Conlumino analyst Stephen Ward said: “While the venture is dilutive in the short term we remain supportive of the expansion and are encouraged by the relatively cautious pace, which is allowing Nordstrom to learn as it grows. Ultimately, we believe Canada is a lucrative market for enhancing sales and profit potential.”
Stifel analyst Richard Jaffe added: “Longer term, we believe that Nordstrom's numerous initiatives will prove fruitful.
He later noted: “Longer term, as Canada opens more stores and begins to leverage the infrastructure build-out, we expect a meaningful contribution. We believe that management will gain greater expertise in operating a multichannel business and will use this approach to better drive sales and please customers.”
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