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Financial Roundup: Gap Inc., Nordstrom Achieve Sales Growth, Hudson’s Bay Makes Cuts


Market expansion and operating improvements boosted Nordstrom’s fourth quarter and fiscal 2016 results.

Net earnings for the fourth quarter ended Jan. 28, 2017 were $201 million and EBIT was $424 million (10 percent of net sales), compared to net earnings of $180 million and EBIT of $324 million (7.8 percent of net sales) for fourth quarter 2015.

Total company net sales for fourth quarter increased by 2.4 percent to $4.2 billion compared with net sales of $4.1 billion in the same period last year. Although total company comparable sales decreased 2.7 percent, beauty and apparel were the top performing merchandise categories across U.S. full-line stores and during the fourth quarter.

As a percentage of net sales, retail gross profit for the fourth quarter increased 112 basis points, compared with the same period in fiscal 2015, demonstrating strong inventory execution and successful sales growth from the reduction of competitive markdowns.

The company says its focus on newness and fewer markdowns has let to regular price goods representing more market share. Nordstrom attributes this to its selection of limited distribution brands like Good American and Ivy Park.

Fiscal 2016 net earnings were $354 million and EBIT was $0.8 billion (5.6 percent of net sales), which was less than net earnings of $600 million and EBIT of $1.1 million (7.8 percent of net sales) for fiscal 2015.

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Total company net sales for fiscal 2016 increased by 2.9 percent to $14.5 billion, compared to net sales of $14.1 billion in fiscal 2015. Total company comparable sales were down by 0.4 percent.

As a percentage of net sales, retail gross profit for fiscal 2016 decreased by 7 basis points to 34.9 percent. Selling and administrative expenses, as a percentage of net sales, increased 19 basis points compared with fiscal 2015. Nordstrom expressed progress with supply chain initiatives and branding last year as well.

Online sales have grown by 30 percent on an annualized basis since 2010 to $3 billion. Ecommerce now represents almost a quarter of the company’s business. To boost this growth, the company continues to invest in features like buy online, pick up in store and hangtag scanners that allow in-store customers to order their size or color of a garment that’s not available there.

When asked about the protracted news cycle surrounding the Ivanka Trump brand on the earnings call, Co-President Pete Nordstrom said the President’s tweets on the matter had a “negligible” effect.

Gap Inc.

Gap Inc.’s investment in digital technology, along with a strong holiday period, contributed to the company’s improved fourth quarter and fiscal 2016 performance.

“We’re pleased to finish the year strong, with positive comp and sales growth during the critical holiday quarter,” Gap Inc. CEO Art Peck said. “Going forward, we will maintain our focus on improving the quality and relevance of our products, increasing our responsiveness to trends and demand and creating more synergy across channels to deliver the experiences our consumer want and expect, however they choose to shop.”

Fourth quarter net sales increased by 1 percent to $4.43 billion and fiscal year 2016 net sales were $15.1 billion. Foreign currency translation negatively impacted the company’s fiscal 2016 net sales by an estimated $20 million. Comparable sales for fourth quarter were up by 2 percent, compared to a decline of 7 percent for fourth quarter 2015, meanwhile fiscal 2016 comparable sales were down by 2 percent, compared to a decline of 4 percent in fiscal 2015. Old Navy improved by 1 percent while Gap and Banana Republic were both down, 3 percent and 7 percent, respectively.

On a reported basis, the company’s fourth quarter diluted earnings per share were $0.55 and $1.69 for fiscal 2016. Gap’s adjusted diluted EPS were $0.51 for fourth quarter and $2.02 for fiscal 2016, excluding store closure and streamlining initiative costs and a non-recurring tax benefit of about $0.15.

For fourth quarter and fiscal 2016 business highlights, mobile point of sale functionality expanded to about 20 percent of the Gap Inc. U.S. fleet, which enabled store associates to better serve consumers at select Athleta, Gap and Old Navy locations.

For fiscal 2017, Gap Inc. anticipates diluted EPS to be between $1.95 and $2.05, which reflects an estimated negative impact of $0.09 due to changes in currency exchange rates. The company also projected that fiscal 2017 comparable sales will be flat to up slightly. Net sales are projected to be slightly down as well due to foreign currency fluctuations. Gap Inc. also announced its fourth quarter dividend, which will be $0.23 per share and payable on or after April 26, 2017 to shareholders at the close of business on April 5, 2017.

Hudson’s Bay

Hudson’s Bay announces cuts to improve efficiency.

Hudson’s Bay announced comp sales were down 1.2 percent in the fourth quarter, ended January 28, 2017. DSG, which includes Hudson’s Bay, Lord & Taylor and Home Outfitters, and Saks Fifth Avenue posted modest gains of 0.6 percent and 0.1 percent, respectively. HBC Off-Price, which includes Saks Off 5th and Gilt, dropped by 5.9 percent. HBC Europe also slid 2.0 percent.

Total online sales increased 13.3 percent but were dragged down by Gilt.

“We believe the all-channel model is the future of retail, and we are focused on combining best-in-class retail destinations and an advanced digital platform, which will allow our customers to shop whenever, wherever, and however they choose. On a constant currency basis, Digital Sales grew by 20.9% at our department store banners in the fourth quarter of 2016, and we remain excited about the future of our online business,” commented Jerry Storch, chief executive officer.

The company announced it would be streamlining operations in North America, a move that will result in layoffs with severance amounts totaling $30 million. No details were provided, but the goal is to make the HBC more efficient with an eye toward “customer-facing activities while reducing costs in back office and support areas.” The retailer expects the $75 million ($57.25 million US) in annual savings to help offset headwinds in 2017, which includes consumers’ tendency to trade down from high-margin in-store purchases to lower-margin goods online. For the long term, the company is making investments in its digital supply chain, reducing overhead related to e-commerce and bringing innovative technology online.

“As we mentioned in January, we have initiated a comprehensive review of our operations, and are continuously looking for opportunities to streamline our business to drive profitable growth,” Storch said. “Our operational review is ongoing, and we will continue to evaluate additional opportunities to improve productivity, enhance our operating model, and optimize in-store operations.”

The company recently made headlines when it was revealed that it was in talks with Macy’s over a potential takeover.

By Genevieve Scarano with additional reporting by Caletha Crawford