Nordstrom Q4 Profit Up 20%, Plans Rack, Internet Expansion

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NordstromSeattle—Despite a 20% in its fourth quarter earnings, Nordstrom disappointed retail analysts Thursday afternoon with lower-than expected sales and a timid forecast.

For the quarter ended Feb. 2, the luxury department store posted net earnings of $284 million, or $1.40 a share, compared with $236 million, of $1.11 a share, a year ago. That was better than the $1.34 a share that analysts’ average estimate expected.

Total sales rose 13.5% on a year-over-year basis to $3.6 billion, but just missed analysts’ estimate for $3.7 billion. Total company comparable store sales were up 6.3% and Nordstrom said general expenses as a percentage of sales declined by 45 points.

Best performing categories included men’s, kids, and women’s apparel, as well as cosmetics. Best performing regions were the South and Midwest.

Direct sales (from Nordstrom’s website, mobile apps and catalogs) exceeded $1 billion in 2012, led by a 31% growth in comp sales in the quarter, the company said.

“Direct sales growth continues to outpace the overall company, reflecting ongoing initiatives to improve the customer experience online,” the company said.

At Nordstrom Rack, which opened fifteen stores in 2012, net sales rose 23%. Comparable store sales at Rack were up 7.1%, the largest fourth quarter increase in six years.

“There are still some opportunities, but the most important thing is the trend’s improving, so we’re encouraged,” Blake Nordstrom, chief executive told analysts on a conference call Thursday afternoon.

2013 Forecast Lower Than Expected

For the year ended Feb. 2, Nordstrom reported a profit of $735 million, up 8% from fiscal 2011. That came to $3.56 a share.

Net sales for the year were $11.8 billion, and total revenues (which include credit card revenues) were $12.1 billion, both up 12%.

Executives believe the company’s direct sales, Nordstrom Rack and new store opening in Canada will represent about half of the company’s total sales within five years.

While the company said it will increase capital expenditures next year as it adds new Rack and full-line stores and builds its internet business, the company’s forecast was weaker than expected. For fiscal 2013, the company expects earnings of $3.65 to $3.80 a share, and total sales growth of 4.5% to 6.5%. Analysts currently expect earnings of $3.97 per share on revenues of $3 billion.

The company expects to open its first stores in Canada in 2014 and includes costs of $20 to $25 million to support the move. However, even including those costs, though, the upper end of the company’s revenues doesn’t quite come up to the analysts’ consensus estimate.

During the quarter, Nordstrom repurchased 4.2 million shares for $219 million.


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