Nordstrom's Profits Double But Miss Estimates
Comparable sales (sales for stores open at least one year) were up 6.9% during the quarter. Full-line store sales were up 3.9% while the Nordstrom Rack chain was up 4.6%. Comparable sales for the year were down 4.2%.
Gross Profit Margins Rise
Gross profit margin rose 5.3 percentage points in the fourth quarter over the same period a year ago, which management said was due to much higher merchandise margins, thanks to less discounting. It almost recovered the 5.6 point drop in the fourth quarter of 2008, said CFO Mike Koppel.
"We entered the year with uncertainty ... and are exiting 2009 with greater confidence in our ability to manage our business effectively through challenging times," he said.
Nordstrom reacted quickly to the department-store sales meltdown early in the recession by cutting back on high-priced designer clothes and stocking up on the better apparel lines, where it also lowered some of the price points. This helped it regain sales growth while other upscale department stores suffered. Sales and inventory became better aligned over the year to respond faster to what customers wanted and reduce the need for markdowns, said Blake Nordstrom.
'Back To A More Normal Rhythm'
"We are getting back to a more normal rhythm or cadence," said Pete Nordstrom, president, of merchandising. As the stores went into the fourth quarter, the regular-price business was back to its historical levels and inventories are so tight, "we don't have a big story to tell on clearance," he said.
Overlapping with those improving trends on latter half of 2010 will make it harder to show year-over-year growth this year, said Koppel. While the company has seen an increase in transactions, it's not factoring increased prices in its forecast, because management sees "lingering caution from customers," due to the iffy economic condition, he said.
Management said it expects comparable sales to grow 2% to 4% this year and earnings will range between $2.35 and $2.55 for the full year. The company expects to increase its gross profit rate by 0.2 to 0.6 percentage points to achieve that earnings growth.
Modest Store Opening Schedule
Blake Nordstrom said the company has a modest store opening schedule planned for 2010 -- three new Nordstrom stores and 16 new Rack outlets -- but will will get back to a more regular schedule of remodeling existing stores.
"Our challenge is to keep building on this momentum," he said.