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Rack, E-Commerce Send Nordstrom Sales Up 9.2% in Q2

Nordstrom, Inc. (JWN) reported second-quarter 2015 sales growth that was in line with expectations. Earnings topped Wall Street estimates, however, resulting in increased sales and earnings guidance for the year, and sending the retailer’s stock higher in morning trading.

Led by gains in the off-price and e-commerce businesses, total company net sales increased by 9.2% to $3.6 billion from $3.3 billion in the prior year period, marking the fourth consecutive quarter of high-single-digit growth.

The company said that strategic growth investments, including its entry into Canada, the acquisition of Trunk Club, and launch of, together drove over one-third of the total sales growth in the quarter.

Though full-line (Nordstrom brick-and-mortar) net sales rose by only 1.1% to $2.1 billion, sales jumped by 20 percent to $625 million, helped by continued expansion of merchandise selection.

Nordstrom Rack brick-and mortar net sales increased 13 percent to $857 million, capping 26 consecutive quarters of double-digit growth in the off-price division. net sales increased 50 percent for the second consecutive quarter, to $117 million.

Comparable sales increased 4.9%. Nordstrom comps, which consist of the full-line and businesses, increased 4.8%, led by cosmetics and women’s apparel. The strength in women’s apparel was led by coats, dresses and younger customer-focused departments, such as Topshop, Madewell and Brandy Melville.

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Full-line comparable sales increased 0.8%, reflecting ongoing improvement in sales trends. The Southwest and Southeast were the top-performing geographic regions.

Nordstrom Rack comparable sales increased 1.7%.

Gross profit of $1.3 billion, or 35.3% of net sales, decreased 6 basis points compared with the prior year period.

SG&A expense of $1.0 billion, or 29.1% of net sales, increased 86 basis points compared with the same period in fiscal 2014, due to planned growth initiatives related to Trunk Club and Canada and higher fulfillment costs associated with online growth.

Net income rose 15 percent to $211 million, or $1.09 per diluted share, compared to $183 million, or $0.95 per share, in the prior year period, beating analyst expectations of $0.99.

The Nordstrom Rewards loyalty program continued to contribute to overall results, with members shopping three times more frequently and spending four times more on average than non-members. The Company opened approximately 350,000 new accounts in the second quarter. With 4.5 million active members, sales from members increased 10 percent in the second quarter and represented 44 percent of sales.

So far this year, the Company has opened two full-line stores and 11 Nordstrom Rack stores. In the third quarter, the Company plans to open three full-line stores (Vancouver, BC, Canada; Minneapolis, Minnesota; and Milwaukee, Wisconsin), relocate a full-line store in Los Angeles, California and open 16 Nordstrom Rack stores.

As of August 1, the company operated 118 full-line Nordstrom stores and 178 Nordstrom Rack locations. It plans to have a total of 194 Rack stores by the end of the year.