Nordstrom Inc. reported third quarter earnings results that were in line with company expectations but beat Wall Street forecasts. Net income rose 3.6% to $142 million, or $0.73 per share, from $137 million, or $0.69 per share, in the third quarter of 2013, beating consensus estimates by $0.02 per share.
The company enjoyed an 8.9% increase in total revenue to $3.1 billion, driven primarily by gains in its online and off-price businesses. Total sales at full-line stores increased by 0.5%, and at the company’s Nordstrom Rack division by 15 percent. Direct net sales were up 22 percent, helped by an expanded merchandise selection on the Nordstrom.com e-commerce site. Net sales at the combined Nordstromrack.com and HauteLook flash sale site businesses jumped by 34 percent.
Comparable store sales increased 3.9%, driven primarily by gains in the direct (online) business. Rack comps rose by 1.7%. Comps were flat at the Nordstrom full-line stores in the period, the division’s best quarterly comp performance in several quarters.
Top-performing merchandise categories in the full-line and direct businesses included accessories, cosmetics and men’s apparel. The Southeast, Southwest and Midwest regions were the top-performing geographic areas.
During the quarterly earnings conference call, management commented that it was pleased with some improvements in Nordstrom full-line categories. Top Shop and Top Man, now in 53 locations, are bringing new customers into the stores. Active was mentioned as a strong trend, not only in the activewear department, but also as a component of sportswear.
During the quarter, the company opened three full-line stores, including its first in Canada, and 16 Nordstrom Rack stores. It also acquired men’s personalized clothing service Trunk Club, whose sales grew by a reported 9 percent compared to the same period last year.
Gross margin of 35.5% decreased 33 basis points compared with the same period in 2013, increasing the year-to-date gross margin decline to 52 basis points, due to Nordstrom Rack’s accelerated store expansion and increased discounting.
The company reduced its earnings outlook for the full year to $3.70 to $3.75 from its prior level of $3.80 to $3.90, primarily due to the acquisition of Trunk Club, whose impact on earnings per diluted share is expected to be about 3 percent, $0.04 of which occurred in the third quarter.