Nordstrom Reports First Quarter 2013 Earnings
Nordstrom Reports First Quarter 2013 Earnings
Affirms Full-Year EPS Guidance
SEATTLE--(BUSINESS WIRE)-- Nordstrom, Inc. (NYS: JWN) today reported earnings per diluted share of $0.73 for the first quarter ended May 4, 2013, representing a 4.3 percent increase from $0.70 for the same quarter last year. Net earnings were $145 million compared with $149 million for the same quarter last year.
Total Company net sales of $2.7 billion for the first quarter increased 4.8 percent compared with net sales of $2.5 billion during the same period in fiscal 2012. Total Company same-store sales increased 2.7 percent compared with the same period in fiscal 2012, on top of last year's same-store sales increase of 8.5 percent.
First quarter performance was consistent with the lower end of the Company's expectations as lower than planned sales volume was mitigated by the Company's management of inventory and expenses. While in the first two months of the quarter the Company experienced particularly soft sales trends in seasonal merchandise and geographically in the Northeast, Mid-Atlantic and Midwest regions, overall sales trends showed improvement in April.
The Company continues to expect annual earnings per diluted share consistent with the previous outlook of $3.65 to $3.80. This reflects full-year same-store sales increases of 3 to 5 percent and incorporates the performance of the first quarter. It also includes the impact of share repurchases in the first quarter, which is expected to increase earnings per diluted share by approximately $0.05.
FIRST QUARTER SUMMARY
- Nordstrom same-store sales, which consist of the full-line and Direct businesses, increased 3.1 percent. Top-performing merchandise categories included Cosmetics, Women's Apparel and Handbags. Women's Apparel outpaced the multi-channel average for the third consecutive quarter.
- Full-line same-store sales were flat compared with last year's same-store sales increase of 5.6 percent. The Northern California and Southwest regions were the top-performing geographic areas relative to the first quarter of 2012.
- Direct continued to generate strong sales growth with an increase of 25 percent in the first quarter on top of last year's increase of 44 percent.
- Nordstrom Rack net sales increased $58 million, or 10 percent, compared with the same period in fiscal 2012, reflecting 16 new store openings since the first quarter of fiscal 2012. Same-store sales increased 0.8 percent for the Rack on top of last year's same-store sales increase of 6.8 percent.
- Gross profit, as a percentage of net sales, decreased 50 basis points compared with the same period in fiscal 2012. The decrease reflected higher occupancy costs related to the accelerated Rack store expansion, combined with lower than planned sales volume. The decrease was also due to higher expenses associated with the growth in the Fashion Rewards program.
- Ending inventory per square foot increased 5.9 percent compared with the same period in fiscal 2012. This outpaced sales per square foot growth of 2.3 percent for the quarter and was attributable to the planned investment in pack and hold inventory at Nordstrom Rack.
- Selling, general and administrative expenses, as a percentage of net sales, increased 14 basis points compared with the same period in fiscal 2012. The increase included incremental costs related to the planned entry into Canada and accelerated Rack store expansion, coupled with a $10 million reduction in the reserve for bad debt taken in the first quarter of 2012. The Company continued to invest in technology and e-commerce to support its accelerated online growth.
- Earnings before interest and taxes of $275 million decreased 1.8 percent compared to $280 million for the same quarter last year.
- During the quarter, the Company repurchased 3.0 million shares for $166 million. A total of $1.0 billion remains under existing share repurchase board authorizations. The actual number and timing of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission rules.
- Return on invested capital (ROIC) for the 12 months ended May 4, 2013 of 14.0 percent increased from 13.1 percent in the prior 12-month period. A reconciliation of this non-GAAP financial measure to the closest GAAP measure is included below.
FINANCIAL STATEMENT RECLASSIFICATIONS
Beginning in the first quarter of 2013, Nordstrom reclassified amounts in its financial statements to reflect the way the Company views and measures its business. As the Company continues to execute its long-term growth strategy and make investments across operating segments, aligning expenses with the associated benefits enhances the ability to evaluate segment performance. These reclassifications did not impact net earnings, earnings per share, financial position or cash flows.
The Company reclassified Fashion Rewards expenses and technology expenses between our Retail Business and Credit segment. In addition, the Company previously presented bad debt expense associated with finance charges and fees as part of selling, general and administrative expenses. The Company now presents this as a reduction of credit card revenue. For additional detail, see the Form 8-K filed on May 16, 2013 and the Investor Relations section of the Company's corporate website at http://investor.nordstrom.com.
Nordstrom opened the following stores in the first quarter of 2013:
|Boston, Massachusetts||The Newbry||39||March 14|
|Upland, California||Colonies Crossroads||35||March 14|
|Ann Arbor, Michigan||Arborland Center||30||April 18|
|Lake Orion, Michigan||Baldwin Commons||35||April 18|
|Washington, D.C.||L Street||34||April 18|
Additionally, today the Company opened Rack stores in Alabama, Maine and Maryland.
FISCAL YEAR 2013 OUTLOOK
The Company's earnings per diluted share expectations for fiscal 2013 are unchanged. The Company's expectations for fiscal 2013, shown in comparison to the reclassified 53-week fiscal 2012 where applicable, are as follows:
|Prior Outlook||Current Outlook|
|Total sales||4.5 to 6.5 percent increase||4 to 6 percent increase|
|Same-store sales||3.5 to 5.5 percent increase||3 to 5 percent increase|
|Credit card revenues1||$0 to $5 million increase||$0 to $5 million increase|
|Gross profit (%)||10 to 30 basis point decrease||10 to 30 basis point decrease|
|Selling, general and administrative expenses (%)1||0 to 10 basis point decrease||0 to 10 basis point decrease|
|Interest expense, net||$5 million decrease||$5 million decrease|
|Effective tax rate||39.0 percent||39.0 percent|
|Earnings per diluted share, excluding the impact of any future share repurchases|
$3.65 to $3.80
$3.65 to $3.80
|Diluted shares outstanding||Approximately 203 million||Approximately 200 million|
1 Impacted by financial statement reclassifications as described above. These reclassifications did not result in a change to the current outlook relative to the prior outlook.
The 53rd week in fiscal 2012 creates a timing shift in the 4-5-4 calendar for fiscal 2013 that is expected to impact comparisons of performance to the prior year. Same-store sales are compared with the first 52 weeks of 2012. In 2013, the Anniversary Sale, which is the Company's largest sale event of the year, will occur in the second quarter, while in fiscal 2012 it overlapped the second and third quarters.
The Company is providing the following view of quarterly trends, relative to annual fiscal 2013 expectations:
|Compared to Annual Fiscal 2013 Guidance Range|
Second Quarter 2013
|Second Half 2013|
|Same-store sales||3 to 5 percent increase||Above||Below|
|Earnings per diluted share||3 to 7 percent increase||Above||Below|
CONFERENCE CALL INFORMATION
The Company's senior management will host a conference call to discuss first quarter 2013 results and 2013 outlook at 4:45 p.m. Eastern Daylight Time today. To listen to the live call online and view the speakers' slides and Performance Summary document, visit the Investor Relations section of the Company's corporate website at http://investor.nordstrom.com. An archived webcast with the speakers' slides and Performance Summary document will be available in the Earnings section for one year. Interested parties may also dial 415-228-4850 (passcode: NORD). A telephone replay will be available beginning approximately one hour after the conclusion of the call by dialing 203-369-0544 (a passcode is not required) until the close of business on May 23, 2013.
Nordstrom, Inc. is one of the nation's leading fashion specialty retailers. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 248 stores in 33 states, including 117 full-line stores, 127 Nordstrom Racks, two Jeffrey boutiques, one treasure&bond store and one clearance store. Nordstrom also serves customers through Nordstrom.com and through its catalogs. Additionally, the Company operates in the online private sale marketplace through its subsidiary HauteLook. Nordstrom, Inc.'s common stock is publicly traded on the NYSE under the symbol JWN.
Certain statements in this news release contain or may suggest "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including, but not limited to, anticipated financial outlook for the fiscal year ending February 1, 2014, anticipated annual same-store sales rate, anticipated Return on Invested Capital, anticipated store openings and trends in our operations. Such statements are based upon the current beliefs and expectations of the company's management and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to: successful execution of our growth strategy, including expansion into new markets, technological investments and acquisitions, our ability to realize the anticipated benefits from such growth initiatives, and the timely completion of construction associated with newly planned stores, relocations and remodels, all of which may be impacted by the financial health of third parties; our ability to manage the transformation of our business/financial model as we increase our investments in growth opportunities, including our online business and our ability to manage related organizational changes; our ability to maintain relationships with our employees and to effectively attract, develop and retain our future leaders; effective inventory management, disruptions in our supply chain and our ability to control costs; the impact of any systems failures, cybersecurity and/or security breaches, including any security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or company information or our compliance with information security and privacy laws and regulations in the event of such an incident; successful execution of our information technology strategy; efficient and proper allocation of our capital resources; our ability to safeguard our reputation and maintain our vendor relationships; the impact of economic and market conditions and the resultant impact on consumer spending patterns; our ability to respond to the business environment, fashion trends and consumer preferences, including changing expectations of service and experience in stores and online; the effectiveness of planned advertising, marketing and promotional campaigns in the highly competitive retail industry; weather conditions, natural disasters, health hazards, national security or other market disruptions, or the prospects of these events and the impact on consumer spending patterns; our compliance with applicable banking related laws and regulations impacting our ability to extend credit to our customers, employment laws and regulations, certain international laws and regulations, other laws and regulations applicable to us, including the outcome of claims and litigation and resolution of tax matters, and ethical standards; impact of the current regulatory environment and financial system and health care reforms; compliance with debt covenants, availability and cost of credit, changes in interest rates, and trends in personal bankruptcies and bad debt write-offs; and the timing and amounts of share repurchases by the company, if any, or any share issuances by the company, including issuances associated with option exercises or other matters. Our SEC reports, including our Form 10-K for the fiscal year ended February 2, 2013, contain other information on these and other factors that could affect our financial results and cause actual results to differ materially from any forward-looking information we may provide. The company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.
CONSOLIDATED STATEMENTS OF EARNINGS
|(unaudited; amounts in millions, except per share amounts)|
|Credit card revenues||92||90|
|Cost of sales and related buying and occupancy costs||(1,673||)||(1,584||)|
|Selling, general and administrative expenses||(801||)||(761||)|
|Earnings before interest and income taxes||275||280|
|Interest expense, net||(39||)||(40||)|
|Earnings before income taxes||236||240|
|Income tax expense||(91||)||(91||)|
|Earnings per share:|
|Weighted-average shares outstanding:|
CONSOLIDATED BALANCE SHEETS
|(unaudited; amounts in millions)|
|Cash and cash equivalents||$||1,190||$||1,285||$||1,647|
|Accounts receivable, net||2,087||2,129||2,008|
|Current deferred tax assets, net||226||227||215|
|Prepaid expenses and other||84||80||79|
|Total current assets||5,072||5,081||5,321|
Land, buildings and equipment (net of accumulated depreciation of $4,164, $4,064 and $3,865)
|Liabilities and Shareholders' Equity|
|Accrued salaries, wages and related benefits||230||404||232|
|Other current liabilities||856||804||793|
|Current portion of long-term debt||7||7||6|
|Total current liabilities||2,299||2,226||2,207|
|Long-term debt, net||3,119||3,124||3,137|
|Deferred property incentives, net||482||485||503|
|Commitments and contingencies|
Common stock, no par value: 1,000 shares authorized; 195.0, 197.0 and 208.6 shares issued and outstanding
|Accumulated other comprehensive loss||(45||)||(47||)||(44||)|
|Total shareholders' equity||1,888||1,913||2,083|
|Total liabilities and shareholders' equity||$||8,135||$||8,089||$||8,258|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|(unaudited; amounts in millions)|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|Depreciation and amortization expenses||109||101|
|Amortization of deferred property incentives and other, net||(16||)||(18||)|
|Deferred income taxes, net||(11||)||-|
|Stock-based compensation expense||17||13|
|Tax benefit from stock-based compensation||6||13|
|Excess tax benefit from stock-based compensation||(7||)||(14||)|
|Provision for bad debt expense||14||9|
|Change in operating assets and liabilities:|
|Prepaid expenses and other assets||(5||)||2|
|Accrued salaries, wages and related benefits||(174||)||(156||)|
|Other current liabilities||54||33|
|Deferred property incentives||16||21|
|Net cash provided by operating activities||161|