Upscale department store operator,
) posted third-quarter fiscal 2013 earnings of 69 cents per
share, outpacing the Zacks Consensus Estimate of 66 cents.
However, the reported figure was below the year-ago comparable
quarter earnings of 71 cents per share, primarily due to a 6-cent
negative impact from the shift of Anniversary Sale event to the
Total revenue rose 2.8% year over year to $2,884 million and
surpassed the Zacks Consensus Estimate of $2,881 million. Revenue
growth was driven by a 2.9% year-over-year increase in Net Retail
sales to $2,791 million and a 1.1% increase in Credit Card
revenues to $93 million. However, quarterly sales were negatively
impacted due to shift of the Anniversary Sale event to the second
quarter compared with third quarter of fiscal 2012.
Total comparable store sales (comps) inched up 0.1% in the
quarter against a gain of 2.9% in the year-ago quarter. The
company registered 4.2% decline at its full-line stores, while
comps at Nordstrom Rack increased 3.7%. The company's direct net
sales increased 23%, whereas Nordstrom Rack net sales rose
Additionally, Nordstrom's comps (including full-line and
direct businesses) dropped 0.7% in the quarter, as against 11.2%
rise in the year-ago comparable period. However, Women's Apparel,
Women's Shoes, and Cosmetics continued to witness growth as
compared with the prior-year period.
Gross profit in the quarter grew 1.7% year over year to $1,001
million. However, due to increased occupancy costs related to
expansion of Rack Stores, Nordstrom's gross profit margin as a
percentage of net sales at the retail segment contracted 41 basis
points (bps) to 35.9%.
Total selling, general and administrative (SG&A) expenses
increased 4.6% to $793 million in the quarter. As a percentage of
sales, it increased 65 bps primarily due to rise in expenses
related to shift of the Anniversary Sale event, increased
investments for technological enhancements as well as expansion
of Rack stores in Canada.
Nordstrom's operating income decreased nearly 8.0% to $208
million compared with $226 million in the prior-year period.
Moreover, operating margin contracted 80 bps to 7.5% primarily
due to lower gross margin and higher SG&A expenses as a
percentage of sales.
Balance Sheet and Cash Flow
Nordstrom ended the quarter with cash and cash equivalents of
$947 million compared with $1,158 million at the end of the
year-ago quarter. Long-term debt net of current liabilities was
$2,711 million versus $3,129 million in the prior-year period.
During the first three quarters of fiscal 2013, Nordstrom
generated $718 million in cash from operations.
Capital expenditures for nine months ended as of Nov 2, 2013
were $621 million. During the quarter, the company bought back
nearly 2.7 million shares for about $155 million. Currently,
Nordstrom has about $824 million worth of shares remaining under
its existing share repurchase authorization.
Nordstrom declared plans to open 4 Rack stores and relocate
one Rack outlet in the remainder of 2013. During the quarter, the
company opened 11 Rack stores and 1 full-line store. At the
quarter-end, the store count totaled 257 as against 238 at the
end of the prior-year quarter.
Along with its third-quarter results, Nordstrom updated fiscal
2013 outlook. Nordstrom now expects total sales and comps to
increase by 3.5% and 2.5%, respectively, compared with the prior
forecasts of 3%-4% and 2%-3%, respectively. Further, gross margin
is expected to contract 30-40 bps year over year.
Management projects SG&A expenses, as a percentage of
sales, to rise 0 to 10 bps. Further, the company now expects
interest expenses to decline $10 million, against the previously
guided range of $5-$10 million.
Furthermore, the company raised its lower-end earnings
forecast. Nordstrom now expects fiscal 2013 earnings to come in
the range of $3.65-$3.70 per share as compared with the earlier
guidance of $3.60-$3.70. The current Zacks Consensus Estimate is
pegged at $3.68 per share, which dovetails with the company's
Management expects tax rate to be 38.3% compared with the
earlier guidance of 38.6%.
Nordstrom currently carries a Zacks Rank #3 (Hold). Other
stocks that are performing well in the retail-apparel/shoe sector
Finish Line Inc.
Gildan Activewear Inc.
). All of these carry a Zacks Rank #2 (Buy).
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