Upscale department store operator,
) posted fourth-quarter and fiscal 2013 results wherein earnings
for both periods surpassed expectations as the company's customer
strategy continued to bear fruit, reflecting growth across
channels along with efficient inventory and expense management.
Fourth-quarter earnings of $1.37 per share surged higher than the
Zacks Consensus Estimate of $1.33, while it declined 2.1% year
over year. Year-over-year comparisons for the quarter were mainly
impacted by the inclusion of an additional week in the fourth
quarter of fiscal 2012.
For the full-year, the company reported earnings per share of
$3.71, higher than the Zacks Consensus Estimate of $3.68 and the
company's forecasted range of $3.65 to $3.70. Moreover, earnings
escalated 4.2% from the year-ago earnings of $3.56 per share.
Total revenue of $3,711 million in the quarter remained almost
flat with the prior-year quarter, reflecting only a marginal 0.4%
increase. Quarterly revenue also surpassed the Zacks Consensus
Estimate of $3,705 million. The marginal improvement stemmed from
near-to-flat Net Retail sales to $3,614 million and a 4.9%
decline in Credit Card revenues to $97 million. Notably, sales
trends in the quarter remained consistent with the trends
witnessed through fiscal 2013.
Fiscal 2013 total revenue rose 3.3% to $12,540 million, while it
surpassed the Zacks Consensus Estimate of $12,480 million.
Total comparable store sales (comps) improved 2.6% in the quarter
against a gain of 6.3% in the year-ago quarter. The company
registered a 3.3% decline at its full-line stores, while comps at
Nordstrom Rack increased 3.6%. Moreover, the company reported
comps gain of 30% each for its Direct and HauteLook businesses.
Nordstrom Rack net sales rose 10.2% benefiting from about 22 new
Rack stores opened in fiscal 2013.
Additionally, Nordstrom's comps (including full-line and direct
businesses) rose 2.2% in the quarter, as against 6.1% rise in the
year-ago comparable period. Outperforming categories in the
quarter included Cosmetics, Accessories, and Men's Shoes, while
the company also saw momentum in the Women's Apparel category.
Q4 Operational Update
Gross profit in the quarter declined 1.2% year over year to
$1,442 million. However, due to increased markdowns resulting
from highly promotional environment during the holiday season and
higher occupancy costs related to the expansion of Rack Stores,
Nordstrom's gross profit margin in the retail segment contracted
55 basis points (bps) to 38.9%.
Total selling, general and administrative (SG&A) expenses
dipped 0.6% to $955 million in the quarter. As a percentage of
sales, it decreased 30 bps primarily due to reduced selling
expenses, offset by increased investments in growth projects
pertaining to the company's entry in Canada and for expansion of
Nordstrom's operating income decreased nearly 2.2% to $487
million compared with $498 million in the prior-year period.
Moreover, operating margin contracted 40 bps to 13.1% primarily
due to lower gross margin offset by lesser SG&A expenses as a
percentage of sales.
Balance Sheet and Cash Flow
Nordstrom ended the year with cash and cash equivalents of $1,194
million compared with $1,285 million at the end of the prior
year. Long-term debt net of current liabilities was $3,106
million versus $3,124 million in the prior-year period. During
fiscal 2013, Nordstrom generated $1,320 million in cash from
Capital expenditures for the fiscal year were $803 million.
During the quarter, the company bought back nearly 2.5 million
shares for about $154 million. Currently, Nordstrom has about
$670 million worth of shares remaining under its existing share
During fiscal 2013, the company opened 20 new Rack and other
stores, expanding the total company store count to 260 as against
240 at the end of fiscal 2012.
Looking into fiscal 2014, Nordstrom plans to further expand its
store base with the opening of 30 new stores throughout the year,
including 3 full-line stores and 27 Rack stores. Moreover, the
company will continue to find opportunities for further
integration with HauteLook in fiscal 2014.
Following the mixed year-end results, Nordstrom provided its
expectations for fiscal 2014, anticipating continued investments
for delivering sustainable sales, earnings and ROIC growth.
Nordstrom expects total sales to increase by 5.5% - 7.5% and
comps to rise in the range of 2% - 4% in fiscal 2014. Further,
gross margin is expected to contract 10-30 bps year over year.
Management projects SG&A expenses, as a percentage of sales,
to rise 10 to 30 bps. Further, the company expects interest
expenses to decline $25 million in fiscal 2014. Tax rate is
expected to be about 39.0%.
Nordstrom expects fiscal 2014 earnings to come in the range of
$3.75-$3.90 per share, assuming shares outstanding of nearly 196
million. However, the company expects the ongoing infrastructure
investments and pre-opening costs related to its entry into
Canada to lower earnings throughout fiscal 2014.
The company projects loss before interest and taxes of $35
million for Canada in fiscal 2014 compared with a loss of $14
million incurred in fiscal 2013.
Additionally, the company estimates the Canadian venture along
with its expansion plans for Rack stores will raise depreciation
and rent expenses in fiscal 2014. As a result, the company
projects depreciation and amortization of nearly $514 million in
fiscal 2014, representing 13% growth from the fiscal 2013 level.
Rent expenses for fiscal 2014 are expected to rise 17% from the
fiscal 2013 level to $147 million.
Nordstrom also came up with projections for the first quarter of
fiscal 2014, anticipating earnings per share in the range of 60 -
70 cents, with sales expected to increase in the 3.5%- 5.5%
Other Stocks to Consider
Nordstrom currently carries a Zacks Rank #4 (Sell). Better-ranked
stocks in the apparel and shoe space include
Christopher & Banks Corporation
Francesca's Holdings Corporation
Finish Line Inc.
). While Christopher & Banks sports a Zacks Rank #1 (Strong
Buy), Francesca's Holdings and Finish Line hold a Zacks Rank #2
CHRISTOPHER&BNK (CBK): Free Stock Analysis
FINISH LINE-CLA (FINL): Free Stock Analysis
FRANCESCAS HLDG (FRAN): Free Stock Analysis
NORDSTROM INC (JWN): Free Stock Analysis
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