Nordstrom Inc.’s US department stores saw net sales decrease 9.4% in Q3 ending 28 October and gross merchandise value drop 9.8% compared to the prior year’s quarter.
The company said in the third quarter it delivered year-over-year profit growth despite lower sales in a challenging macroeconomic environment.
It continued to make progress on its three priorities: improving Nordstrom Rack performance, increasing inventory productivity, and optimising its supply chain.
Nordstrom Inc. said that following four consecutive quarters of reductions in variable supply chain costs of more than 100 basis points, it was able to drive another 50-basis point reduction in the third quarter.
During the quarter, Nordstrom Inc. opened 11 new Rack stores, with an additional one introduced early in the fourth quarter, bringing the total to 19 for the year.
“Rack stores continue to be a great investment for us, delivering returns well in excess of their cost of capital, with a short payback period,” said Erik Nordstrom CEO of Nordstrom, Inc.
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“They also continue to be our largest source of new customer acquisition.”
Sales at Nordstrom’s namesake stores fell 9.4%, and they were down 1.8% at its off-price Nordstrom Rack stores. Online sales sank 11.3%
The decline was attributed to the closing down of its Canadian operations, a move acknowledged by the company as having an adverse impact on its overall net sales, resulting in a decline of 270 basis points (bps).
The company’s efforts to improve its supply chain have also contributed to increased productivity in-store fulfilment for online orders at the Nordstrom banner, and better inventory positioning and flow across the company.
Highlights from Nordstrom Q3:
- Total revenue declined to $3.3bn,
- EBITDA increased to $102m from $3m in 2022,
- The company booked a profit of $67m compared to $20m loss the year before.
The CEO explained that the company was seeing continued uncertainty and softening consumer spending and how changes in inflation, higher interest rates, and the resumption of student loan repayments will affect discretionary consumer spending during the holiday season.
However, he noted that store inventories were 9% lower, and that “required fewer markdowns than last year and helped to drive expansion in our gross margin.”
The company’s gross merchandise value (GMV) declined by 7.1% against last year’s quarter.
Updated FY23 outlook
Nordstrom Inc. reaffirmed its full-year revenue outlook of a decline of 4% to 6% but narrowed its EPS guidance to $1.90 to $2.10 from the previous $1.80 to $2.20.
Including charges from the closure of Canadian operations, Nordstrom expects EPS to be in the range of $0.74 to $0.94 for FY2023.
“Looking ahead, we expect to end the year with an improved inventory position in this category,” added Pete Nordstrom, president of Nordstrom. “Heading into holiday, we’re optimistic and pleased that our offering strikes the right balance of newness and relevance that our customers want.”