In the second quarter, Nordstrom's net sales exceeded expectations by 3.4%, with a 8.8% increase in the discount business, Rack. Nordstrom has revised its expected decline in annual revenue from 2% to 1%, with revenue guidance still expecting a 1% growth at the upper end. Executives stated that typically two-thirds of the company's profits come from the second half of the year, and the environment remains uncertain, maintaining caution for the second half performance.
The US mid-to-high-end chain store Nordstrom recently reported better-than-expected performance for the past quarter, with the discount chain store business Rack performing even more impressively. The company's full-year performance guidance is more optimistic, but it remains cautious about the outlook for the second half of the year.
After the post-market trading on Tuesday, August 27th, Nordstrom announced the financial data for the company's second quarter ending on August 3, 2024.
1) Key Financial Figures:
EPS: The adjusted diluted earnings per share (EPS) for the second quarter was $0.96, a 14.3% year-on-year increase, exceeding analysts' expectation of $0.72.
Revenue: Total revenue for the second quarter was $3.89 billion, slightly surpassing analysts' expectation of $3.88 billion; net sales for the second quarter amounted to $3.79 billion, a 3.4% year-on-year increase, compared to analysts' expectation of $3.78 billion.
Expected Q3 revenue growth of 3.25%-4.25% and adjusted earnings per share of 0.51-0.52 US dollars, below the market estimate of 0.55 US dollars.
EPS: The projected annual EPS is $1.40-1.70, lower than the original estimate of $1.65-2.05.
Revenue: The full-year revenue is expected to decline by 1% to grow by 1%, compared to the company's original forecast of a 2% to 1% decline.
Profit Margin: The full-year EBIT margin is expected to be 3%-3.4%, compared to the company's original forecast of 3.5%-4%.
After the financial report was released, Nordstrom, which had fallen by more than 2% post-market, surged, with the post-market increase exceeding 10% at one point.
In the second quarter, Nordstrom's discount store business Rack net sales exceeded expectations, with a year-on-year growth of 8.8%, far outpacing the company's total sales. The same-store sales of this business in the quarter increased by 4.1%, much stronger than the overall same-store sales growth of 1.9% for the company. Nordstrom mentioned that its annual anniversary promotion event contributed to Rack's business growth.
Analysts say that the second-quarter data may alleviate investors' concerns about the unstable performance of Rack. In an environment of high inflation and high interest rates, consumers are turning to discount retailers for shopping, boosting the performance of companies like TJX Cos and Ross Stores. Last week, Target's financial report showed better-than-expected performance, reflecting increased foot traffic due to price reductions.
In its latest guidance, Nordstrom raised the lower end of the revenue guidance, expecting the minimum revenue decline to be adjusted from 2% to 1%. Its management expressed caution about the second half of the year, as holiday demand is expected to drive overall sales for retailers.
Nordstrom's Chief Financial Officer (CFO) Cathy Smith stated that the industry still faces uncertainty, and like other retailers, the majority of Nordstrom's profit comes from the second half of the year. Usually, two-thirds of the company's profit comes from the second half, so the adjustment is carefully considered.