Nordstrom Posts Q4 Top- and Bottom- line Gains, But 2024 Outlook Soft
● While the Seattle-based retailer performed well during the 2023 holiday season, the top line is seen either turning negative or having minimal gains this year.
Nordstrom Inc., demonstrating that turnaround efforts are kicking in, reported gains on both the top and bottom lines for the fourth quarter.
Lifted by improved top-line performance at the Rack off-price division, Nordstrom reported fourthquarter net earnings of $134 million, or 82 cents a diluted share, compared to earnings of $119 million, or 74 cents a share, in the year-ago period.
Earnings before interest and taxes were $215 million in the fourth quarter of 2023, compared with $187 million during the same period in fiscal 2022. Adjusted EBIT of $247 million for the fourth quarter of 2023 excluded a supply chain asset impairment charge.
Net sales in the latest quarter rose 2.2 percent to $4.3 billion last quarter versus $4.2 billion in the year-ago period. Gross merchandise value, or GMV, increased 2 percent.
However, while reporting the positive holiday performance, the company forecasts for fiscal 2024:
● A revenue range, including retail sales and credit card revenues, of a 2 percent decline to 1 percent growth versus the 53-week fiscal 2023, which includes an approximately 135 basispoint unfavorable impact from the 53rd week.
● Comparable sales range of between a 1 percent decline to a 2 percent increase versus 52 weeks in fiscal 2023.
● EBIT margin of 3.5 to 4 percent of sales.
Investors reacted to the forecast by dragging Nordstrom stock down 10 percent, or $2.10, to $18.80, in after-hours trading Tuesday.
By division, Nordstrom banner net sales in the fourth quarter decreased 3 percent and GMV decreased 3.4 percent, compared with the fourth quarter of 2022.
Net sales for Nordstrom Rack increased 14.6 percent.
“We delivered on our 2023 guidance and are confident in our expectations for continued sales improvement and sustained profitability in 2024,” said Erik Nordstrom, chief executive officer of Nordstrom Inc. “We're laser-focused on efforts we know will drive growth and profitability across the business over the next few years, including new Rack store openings, Nordstrom digital growth and increasing comp-store sales. We have a strong team dedicated to building on our heritage of service, and we look forward to helping our customers feel good and look their best in the year ahead.”
In the fourth quarter, active, beauty and women's apparel had the strongest growth versus 2022.
“In 2023, we continued to make progress against the priorities we identified at the outset of the year to improve the customer experience and drive better financial results. Across both banners, we improved our merchandise assortment by effectively managing our inventory levels and investing in the products and brands we know our customers respond to,” said Pete Nordstrom, president of Nordstrom Inc. “This year we'll build on that progress in merchandising and other green shoots across our business as we focus our efforts on our refreshed 2024 priorities.”
While the 2024 outlook is cautious, in its statement released Tuesday the company said it expects fiscal 2024 to be “a year of continued momentum in its growth and profitability drivers, including opening new Rack stores, growing Nordstrom banner digital sales and driving comparable store sales across both banners.”
For all of 2023, Nordstrom posted sales of $14.22 billion, compared to $15.09 billion in 2022. Net earnings dropped to $134 million in 2023 versus $245 million in 2022. EBIT was $251 million and adjusted EBIT of $567 million excluded charges related to the wind-down of Canadian operations reported in the first and third quarters and a supply chain asset impairment charge in the fourth quarter.
The company did end the year in what executives described as a better inventory position, enabling a greater amount of fresh product to be delivered, and fewer markdowns.
Erik Nordstrom outlined three key priorities for 2024: Nordstrom banner growth, with a focus on digital growth; operational optimization with a focus on faster fulfillment and faster deliveries to customers, and accelerating momentum at Rack, with 22 store openings planned on top of the 19 opened in 2023.
The CEO, during a conference call, said store traffic continues to be on the soft side, though traffic did improve sequentially at the Nordstrom banner during 2023, average order value and selling prices increased at Nordstrom stores and Nordstrom.com, the Manhattan flagship has been showing “real strong growth,” and that the promotional environment across retailing is no more intense than last year.
David Silverman, senior director, Fitch Ratings, in a note on Nordstrom, wrote: “Nordstrom reported an in-line fourth quarter, with surprising strength at its Rack brand. However, the news was overshadowed by a disappointing margin outlook for 2024….In Q4, the Rack banner grew revenue an impressive 9 percent excluding an extra week, reversing a recent trend and demonstrating some stabilization following efforts to reposition the off-price brand in recent years. Nordstrom's flattish revenue guidance for 2024 is likely a reflection of the still-volatile environment for discretionary goods spending, particularly in apparel.”