Nordstrom Misses, Raises Outlook – Analyst Blog

Nordstrom Inc. (JWN), a leading fashion specialty retailer, reported fiscal 2010 first quarter earnings of $116 million or 52 cents per share, compared to $81 million or 37 cents in the year-ago quarter. The quarterly earnings missed the Zacks Consensus Estimate by 3 cents.

 

During the quarter, net sales increased 16.7 % year over year to approximately $2.0 billion, while total revenue rose 16.5% to $2.1 billion. The increase in sales was primarily due to an improved merchandise offering. Same-store sales during the quarter increased 12.0% compared to the year-earlier quarter. Top-selling items included jewelry, dresses and women’s shoes. Geographically, the top performing regions of the company were Midwest, Northeast and Southern regions of the U.S.

 

Same-store sales of Nordstrom Rack increased 1.9% in the first quarter compared to the year-ago period. Gross profit of the company (as a percentage of net sales) increased approximately 245 basis points during the quarter due to improvement in merchandise margin, coupled with reduction in buying and occupancy costs. Sales per square foot increased 13.0% during the quarter, while inventory per square foot increased 1.9% year over year.

 

Selling, general and administrative expenses increased $86 million during the quarter due to the timing of incentive-related expenses and higher expenses related to new store openings. However, growth in revenues and higher gross margin more than offset the increase in operating expenses. Consequently, Nordstrom recorded a 50.0% growth in operating income to $219 million from $146 million in the year-ago period.

 

During first quarter of fiscal 2010, Nordstrom had cash and equivalents of $1.0 billion and long-term debt of $2.8 billion, compared to $78 million of cash and $2.0 billion of long-term debt in the year-ago period. The company opened 2 full-line stores and 6 Nordstrom Rack stores in the first quarter of 2010.

 

In concurrence with the improved first quarter results, the company raised its outlook for the remainder of the year. Nordstrom now expects fiscal 2010 earnings in the range of $2.50 to $2.65 per share, compared to the earlier guidance of $2.35 to $2.55. Management further intends to align the key drivers of its business (inventory, expenses, working capital and capital expenditures) to improve its profitability and augment free cash flow during the fiscal.