Nordstrom Expects Canada Expansion to Weigh on 2014 Earnings

NordstromSeattle—Nordstrom Inc. reported late Thursday afternoon that its fourth quarter fell 5.6% but still beat estimates. The better department store’s 2014 forecast, however, came in under expectations as its costs for entering Canada will weigh on results.

For the quarter ended Feb. 1, Nordstrom posted net earnings of net earnings of $268 million, or $1.37 a share, compared to $284 million, or $1.40 a share, last year. Analysts’ average estimate was lower, for $1.33 a share.

Impact of Canadian Expansion

Net revenue edged up 0.4% to $3.71 billion, just missing analysts’ estimate for $3.73 billion in sales. Retail sales were $3.61 billion compared with $3.60 billion a year ago.

Total company comparable store sales increased 2.6%, led by strong sales of women’s apparel, men’s shoes, cosmetics and accessories. But at Nordstrom brand stores, comp sales fell 3.3%. At Nordstrom Rack, they rose 3.6%.

However, direct sales, which include online business, were up 30%.

Gross profit, as a percentage of net sales, decreased 55 basis points compared with the same period in 2012, primarily due to “increased markdowns in response to heightened promotional activity during the holidays and higher occupancy costs related to Nordstrom Rack’s accelerated store expansion.”

The company also revealed its 2014 capital expenditures will be between $840 million to $880 million compared with $714 million last year. “The majority of the increase represents investments to fuel online and Nordstrom Rack growth in addition to the planned entry into Canada.”

Those expansion plans will mitigate Nordstrom’s earnings somewhat this year. The retailer forecast a full year profit of $3.75 to $3.90 a share below analysts’ estimate for $4.07 on $13.49 billion in sales. Nordstrom expects net sales to grow 5% to 7% and comp store sales to rise 2% to 4%.

For its first quarter Nordstrom estimates a profit of 60 cents to 70 cents a share with sales up 3.5% go 5.5%. That, too, was under analysts’ estimate for 79 cents a share.

Estimated loss before interest and taxes for the Canada division is expected to be about $35 million this year. The company plans to open a Nordstrom department store in Calgary on Sept. 19.


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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology.