Nordstrom Expects Canada Expansion to Weigh on 2014 Earnings

In Industry News, Reports, What's New by Jeff PrineLeave a Comment

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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