Nordstrom FY15 net sales rise but earnings outlook weak

Nordstrom fourth quarter net sales increased 5.2 percent and comparable sales increased 1 percent, consistent with a comparable sales increase of 0.9 percent in the third quarter. For fiscal 2015, earnings per diluted share were 3.15 dollars and net sales increased 7.5 percent. Comparable sales increased 2.7 percent, in-line with the company's outlook of 2.5 to 3 percent.

In response to its current sales trends, Nordstrom has made adjustments to its operating plan, which includes a reduction in expenses and capital investments. The company expects decline in earnings in the first half of 2016.

Highlights of the fiscal 2015

During the year, the company gained market share in both its full-price and off-price businesses, opened its first international flagship store in Vancouver, grew Nordstromrack.com/HauteLook by approximately 50 percent, reaching 0.5 billion dollars or 13 percent of its off-price business.

The company also opened its third fulfillment center in Elizabethtown, Pennsylvania, located within two-day delivery of approximately half the US population and returned 2.4 billion dollars to shareholders through share repurchase and dividends.

Q4 and fiscal 2015 financial review

Fourth quarter net earnings were 180 million dollars and EBIT were 324 million dollars compared with net earnings of 255 million dollars and EBIT of 465 million dollars for the same quarter last year. Full year net earnings were 600 million dollars and EBIT were 1.1 billion dollars compared with net earnings of 720 million dollars and EBIT of 1.3 billion dollars in fiscal 2014.

Full-price net sales, which consist of US full-line stores and Nordstrom.com, increased 0.7 percent and comparable sales increased 0.2 percent. Top-performing merchandise categories included beauty and shoes. Coats, younger customer-focused departments, denim and dresses continued to reflect strength in women's apparel. The Midwest and West were the top-performing full-price geographic regions. Full-price net sales for the whole year increased 2.6 percent and comparable sales increased 2.3 percent and full-line store net sales decreased 0.6 percent and comparable sales decreased 1.1 percent. Nordstrom.com net sales increased 15 percent.

Nordstrom FY15 net sales rise but earnings outlook weak

Full-line store net sales decreased 2.5 percent and comparable sales decreased 3.2 percent in the fourth quarter. Nordstrom.com net sales increased 11 percent. Off-price net sales, which consist of Nordstrom Rack stores and Nordstromrack.com/HauteLook, increased 12 percent and comparable sales increased 3.6 percent. The East was the top-performing off-price geographic region.

Nordstrom Rack net sales increased 6.9 percent while comparable sales decreased 3 percent. Nordstromrack.com/HauteLook net sales increased 50 percent. For FY15, off-price net sales increased 14 percent and comparable sales increased 4.3 percent. Nordstrom Rack net sales increased 10 percent while comparable sales decreased 1.0 percent. Nordstromrack.com/HauteLook net sales increased 47 percent.

Q4 Gross profit, as a percentage of net sales, of 34.8 percent decreased 184 basis points. Full year gross profit, as a percentage of net sales, of 35 percent decreased 92 basis points compared with fiscal 2014.

Retail expansion and outlook

Nordstrom plans to expand retail footprint in fiscal 2016, consisting of three new full-line stores, 20 new Nordstrom Rack stores, one full-line store relocation and two Nordstrom Rack store relocations.

For fiscal 2016, the company expects net sales to increase 3.5 to 5.5 percent, comparable sales to increase 0 to 2 percent and earnings per diluted share to be in the range of 3.10 dollars to 3.35 dollars. In the first half of fiscal 2016, the company expects earnings per diluted share to decrease by approximately 30 percent due to the impact of the sale of the credit receivables in October 2015, the impact of growth initiatives, including its East coast fulfillment center which opened in August 2015 and new store pre-opening expenses as well as the shift of the Anniversary Sale event from the second quarter in 2015 to the second and third quarters in 2016.

 

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