Nordstrom Surpasses Q3 Earnings Estimates but Faces Revenue Setback

Nordstrom Stock

Nordstrom, Inc. (NYSE:JWN) has reported its fiscal third-quarter 2023 results, revealing that while earnings exceeded expectations, revenues fell short. Despite ongoing uncertainty and restrained consumer spending, Nordstrom emphasized its advantageous inventory position across both banners, positioning the company well for the upcoming holiday season.

The adjusted earnings for the quarter stood at 25 cents per share, marking a 25% increase from the previous year’s figure of 20 cents. This also outpaced the Zacks Consensus Estimate of 13 cents per share.

However, total revenues for the quarter amounted to $3,320 million, reflecting a 6.4% decline year over year and missing the Zacks Consensus Estimate of $3,392 million. The decrease was attributed to a 270-basis-point adverse impact from the wind-down of Canada operations and a 7.1% decline in gross merchandise value (GMV). Sales were further hampered by reductions across both the Nordstrom and Nordstrom Rack banners.

Notably, Nordstrom’s shares have experienced a 14.2% decline in the past three months, contrasting with the industry’s overall growth of 9%.

Quarterly Highlights

  • Net sales saw a 6.8% year-over-year decrease to $3,200 million, falling short of the estimated $3,296.5 million.
  • Credit Card net revenues exhibited a 6.2% year-over-year increase to $120 million, surpassing the estimated $111.5 million.
  • Nordstrom banner’s net sales dropped 9.4% to $2,051 million, missing the estimated $2,151 million. GMV for the Nordstrom banner declined by 9.8% year over year, influenced by the wind-down of Canada operations and the negative impact of the Anniversary Sale timing shift.
  • Nordstrom Rack banner’s sales decreased by 1.8% year over year to $1,149 million, slightly exceeding the estimated $1,145.2 million.
  • Digital sales experienced an 11.3% year-over-year plunge in the fiscal third quarter, primarily due to the elimination of store fulfillment for Nordstrom Rack digital orders in the same period last year.

Despite the revenue challenges, Nordstrom’s gross profit margin expanded by 180 basis points to 35%, driven by lower markdowns, increased inventory productivity, and reduced buying and occupancy costs.

Looking ahead, Nordstrom foresees total revenues declining by 4-6% year over year in fiscal 2023, with an expected EBIT margin of 1.8-2.1%. Adjusted earnings are projected to be in the range of $1.90-$2.10 per share, excluding charges related to the wind-down of the Canada business. The company also approved a dividend of 19 cents, payable on Dec 13 to shareholders of record as of Nov 28.

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