Nordstrom Inc reported an earnings per diluted share for the second quarter of US95 cents, exceeding company expectations, and reflecting top-line growth across its full-price and off-price businesses, which increased by 4.1 per cent and 4 per cent respectively.
The company noted quarterly net earnings of US$162 million, compared with US$110 million for the same period in fiscal year 2017. This result was driven largely by higher sales volume, a lower effective tax rate and a new revenue recognition standard.
“Net income increased by 47.3 per cent,” said GlobalData Retail managing director Neil Saunders, who added that this healthy uplift was aided by less promotional activity and lower rates of discounting.
“Much of this is down to the fact that Nordstrom has worked hard to create a compelling and differentiated assortment, especially in fashion, which has both protected margins and stimulated sales growth.”
Sales from members of the retailer’s points-based rewards program, Nordstrom Rewards, represented 58 per cent of second-quarter sales, compared with 56 per cent a year ago.
“As other department stores suffer from the withdrawal of premium brands, Nordstrom has actively developed proprietary labels and partnerships [which] has allowed it to stand out in a sea of sameness and has given customers a reason to visit,” said Saunders.
Digital sales increased by 23 per cent, with Saunders noting the retailer is still gaining share online, and has worked hard to create a seamless shopping process.
“In our view, its advanced thinking gives Nordstrom a significant opportunity to further improve the shopping experience across all channels and bolster its share.”
JCPenney struggles with focus
JC Penney, however, saw a net loss for the quarter of US$101 million, and an operating loss of US$36 million, resulting in a US32 cent loss per share.
Total net sales decreased 7.5 per cent to US$2.76 billion, primarily as a result of the closure of 141 stores in fiscal 2017.
“The most worrying thing about the results is that if JCP can’t perk itself up at a time when the retail mood is elevated, it suggests there are fundamental weaknesses in its position,” said Saunders, with the issue exacerbated by the lack of a proper leadership team following the departure of a number of executives, including CEO Marvin Ellison.
Saunders noted that the retailer no longer had a sense of what it wanted to be, and was unfocused and unsure of its strategy.
“The company has changed direction several times, first trying to attract younger shoppers, then younger mums, and now back to older shoppers.”
Comparable sales increased 0.3 per cent for the quarter, with top-performing categories including children’s, jewellery, Sephora, women’s apparel and salon.
“As ever, Sephora performed well and managed to drive both sales growth and pull in shoppers. However, JCP does not really deserve credit for this as it is merely reaping some of the benefits of another company’s brand strength,” said Saunders.
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