Nordstrom, Inc. (JWN) reported fiscal first-quarter sales and earnings Friday that surpassed expectations on the top line but fell short on the bottom.
For the three months ended May 2, total company net sales increased 9.8% to $3.2 billion, beating Wall Street estimates of $3.1 billion. The gains were driven by new store openings, the acquisition of Trunk Club, exceptional growth in e-commerce sales, and a comparable-store sales increase of 4.4%.
The company opened two Nordstrom full-line stores in the quarter, in Ottawa, Ontario (its second store in Canada) and San Juan, Puerto Rico. It also opened 10 Nordstrom Rack stores around the country as part of its strategy to accelerate store expansion of the off-price brand.
E-commerce sales at Nordstromrack.com (which launched in the second quarter of last year) and HauteLook grew 51 percent on a combined basis.
Nordstrom comparable sales, which consist of the full-line and Nordstrom.com businesses, increased by 4.2%, driven by increases in Women’s and Men’s Apparel.
Full-line net sales increased 0.9% compared with the same period last year, while comparable sales rose by a smaller 0.5%. The Northwest and Southeast were the top-performing geographic regions.
Nordstrom.com net sales increased 20 percent, primarily driven by continued expansion of merchandise selection.
Nordstrom Rack net sales increased $90 million, or 12 percent, compared with the same period in fiscal 2014, reflecting 10 new stores in the first quarter. Nordstrom Rack comps decreased by 0.2%, a sizable drop from last year’s increase of 6.4 percent.
Gross profit of 35.9% of net sales was virtually flat with last year. SG&A expense increased by 141 basis points to 31.2% of net sales, reflecting planned growth initiatives related to Trunk Club, Canada and continuing fulfillment and technology investments.
The company said in its earnings press release that it continued its progress in executing its customer strategy while maintaining disciplined execution around inventory and expenses.
First quarter net earnings were $128 million, or $.66 per share, compared with $140 million, or $.72 per share during the same period last year. Although the company claimed the earnings were in-line with expectations, they fell short of analyst consensus estimates of $.71 per share.
On the earnings conference call, CEO Blake Nordstrom told analysts that the company responded to its customers’ desire for fresh, relevant brands by introducing Charlotte Tilbury, Madewell, Brandy Melville and several others during the quarter.
Nordstrom’s efforts to lure younger female customers with its Topshop collaboration have enabled it to attract more traffic to what it calls its “young zone,” and stimulated interest in BP, SAVVY and other brands. It plans to roll out Topshop to 90 doors by year-end from 67 currently.
Based on first quarter performance, Nordstrom reiterated its annual outlook for earnings per diluted share of $3.65 to $3.80, net sales increase of 7 to 9 percent, and comparable sales increase of 2 to 4 percent.
During fiscal 2015, the company plans to open three additional full-line stores, including another in Canada, and 17 more Nordstrom Rack stores. The retailer views Canada as a $1 billion sales opportunity.