Upscale department store operator,
) reported first-quarter fiscal 2013 earnings of 73 cents per
share, missing the Zacks Consensus Estimate of 76 cents. However,
quarterly earnings rose 4.3% from the year-ago earnings of 70
cents per share.
The company's earnings in the quarter came in line with the lower
end of its projected guidance as prudent inventory and expense
management compensated the loss due to lower-than-expected sales
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Nordstrom's same-store sales and top-line trends remained
encouraging during the quarter, driven by robust performance at
the company's stores. Though the company witnessed weaker sales
trends in seasonal merchandise and geographically in the
Northeast, Mid-Atlantic and Midwest regions during the first two
months of the quarter, sales trends recovered in April.
Total revenue rose 4.7% during the quarter to $2,749 million but
fell short of the Zacks Consensus Estimate of $2,813 million.
Total revenue for the quarter reflected a 4.8% increase in Net
Retail sales to $2,657 million and a 2.2% increase in Credit Card
revenues to $92 million.
Comps for the first quarter gained 2.7% on top of the year-ago
quarter, comprising flat comps in Nordstrom's full-line stores,
25% increase in Direct Sales comps and 0.8% increase in Nordstrom
Rack store comps.
Moreover, Nordstrom's comps (including full-line and direct
businesses) strengthened 3.1% during the quarter, driven by
robust performance in Cosmetics, Women's Apparel and Handbags
Driven by increased occupancy costs related to the expansion of
Rack stores along with lower-than-expected sales volumes,
Nordstrom's gross profit margin at the retail segment contracted
50 basis points to 37.1% compared with 37.6% in the year-ago
quarter. Additionally, the company's elevated expenses related to
the Fashion Rewards program that aims at enhancing customer
relations pulled down the gross margin.
Overall, the company reported gross margin of 39.1%, an increase
of 60 basis points from 39.7% in the year-ago quarter.
Total selling, general and administrative expenses elevated 5.3%
to $801 million in the quarter. However, as a percentage of total
revenue, it contracted 15 basis points to 29.14% from the
year-ago quarter, mainly due to higher costs incurred for the
company's venture in Canada and its accelerated Rack expansions.
During the quarter, the company also recorded a $10 million
decrease in the reserve for bad debt that was taken in the first
quarter of the year-ago period. Moreover, the company's ongoing
investments in technology and e-Commerce to support online
expansion added to its burden.
Consequently, Nordstrom's operating income declined 1.8% to $275
million compared with $280 million reported in the prior-year
period, while operating margin contracted 60 bps to 10.0%.
Balance Sheet and Cash Flow
Nordstrom ended the quarter with cash and cash equivalents of
$1,190 million compared with $1,647 million at the end of the
year-ago quarter. Long-term debt as of May 4, 2013, stood at
$3,119 million. During the first quarter, Nordstrom generated
$161 million in cash from operations.
Capital expenditures as of May 4, 2013 were $149 million. During
the quarter, the company bought back nearly 3.0 million shares
for about $166 million. Currently, the company has about $1.0
billion remaining under its existing share repurchase
Incorporating the first-quarter results, the company now expects
fiscal 2013 sales growth of about 4% -6%, compared to its
previous forecast of 4.5% - 6.5% growth. Similarly, the company
lowered its same store sales guidance for fiscal 2013 to range
from 3% - 5%, against 3.5% - 5.5% projected earlier.
However, the company has reiterated its fiscal 2013 earnings per
share forecast of $3.65 - $3.80 per share, excluding the impact
of future share repurchases. The current Zacks Consensus Estimate
is pegged at $3.80 per share.
Moreover, management continues to project selling, general and
administrative expenses, as a percentage of sales, to decline 10
to 30 basis points. Further, gross margin is expected to contract
between 10 bps and 30 bps year over year.
We believe that this upscale department store chain will continue
to report better financial results in the near future. It is also
expected to continue attracting more shoppers with its various
sales channels and offers. Nordstrom currently has a Zacks Rank
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