Nordstrom (JWN) Earnings Q2 2024

Nordstrom Earnings released Tuesday far exceeded Wall Street expectations, indicating the department store is making progress in its efforts to cut costs and increase efficiency.

Though the Seattle-based retailer reported earnings per share that topped estimates by 25 cents, it issued disappointing guidance for the full year.

Nordstrom now expects adjusted earnings per share to be between $1.75 and $2.05, compared with a previous range of $1.65 to $2.05. It forecasts sales will range between a 1% decline to a 1% increase from the prior year, compared with previous guidance that forecast a 2% decline to a 1% increase.

In a news release, Nordstrom CEO Erik Nordstrom said the company is optimistic about the second half of the year despite the cautious guidance.

“Our second quarter results were solid, and we are encouraged by the continued topline strength across both banners and the progress we're making to expand gross margins and increase profitability,” Nordstrom said. “We're confident in our outlook for the remainder of the year and look forward to maintaining the momentum we've built.”

Shares rose more than 10% in extended trading.

Here's how the department store performed in its second fiscal quarter compared with Wall Street expectations, based on a survey of analysts by LSEG:

• earnings per share: 96 cents adjusted vs. 71 cents expected
• Income: $3.89 billion vs. $3.90 billion expected

The company's reported net income for the three-month period ended Aug. 3 was $122 million, or 72 cents per share, compared with $137 million, or 84 cents per share, a year earlier. Excluding one-time items related to supply chain shortages, the retailer reported adjusted earnings of 96 cents per share.

Sales rose to $3.89 billion, up about 3.4% from $3.77 billion a year earlier. Revenue fell slightly short of analysts' expectations.

Across the company, comparable sales increased 1.9%, while gross merchandise value increased 3.5%. It's unclear how much of this increase in GMV was related to price increases versus volume.

As consumers cut back on discretionary spending in the face of persistent inflation and high interest rates, retailers are working to improve operations and cut costs to protect profits in the face of weak demand.

During the quarter, Nordstrom's profits declined compared to the same period a year earlier, but revenue increased over the past six months. Last year, Nordstrom reported a net loss of $67 million in the six months ended July 29, 2023, but in the same period this year, it reported a profit of $83 million.

Nordstrom has said it is working to improve its supply chain. Last quarter, it said the time it takes for online orders to arrive has gotten faster by more than 5%. It has also improved the way it delivers goods to customers and stores, which has helped it promote higher conversions and lower return rates.

Another key focus area for the company has been growing its off-price banner, Nordstrom Rack. Over the past few quarters, momentum has been building at Nordstrom Rack and this has helped boost the company's overall results. During the quarter, Nordstrom Rack sales grew 8.8%, while comparable sales grew 4.1% compared to the same period a year ago.

That's compared to Nordstrom's main banner, which grew net sales and comparable sales by just 0.9%.

Nordstrom is working to build more Rack locations and has opened 11 new locations so far this fiscal year, with a goal of opening at least 22 locations by the end of the year. Focusing on Rack has been key to Nordstrom's ability to compete with off-price giants TJX Cos.The owner of TJ Maxx and Marshalls wants to appeal to consumers who are still spending — but are eager for cheaper options and deals.

The off-price sector has been seeing tremendous growth over the past year or so, but Rack missed the start of that trend. To reverse the slowdown, the company has focused on opening more locations, hiring off-price veterans, and sharpening its focus on well-known brands.