Nordstrom Reports First Quarter 2020 Earnings

Nordstrom, Inc. (NYSE: JWN) today reported first quarter results, which reflected the Company’s actions to strengthen its financial flexibility through inventory and overhead cost reductions and position the business for the long-term through an acceleration of its strategic initiatives.

Nordstrom continued its momentum from the second half of 2019 with positive sales growth in February and ongoing growth of its $5 billion e-commerce business. The Company temporarily closed stores on March 17 due to COVID-19, which had a material impact on financial results as stores made up two-thirds of its business in 2019. For the first quarter ended May 2, 2020, net sales decreased 40 percent from last year. Loss per diluted share of $3.33 included charges of $1.10 associated with the impact of COVID-19.

“We successfully strengthened our financial flexibility by increasing liquidity, lowering inventory by more than 25 percent from last year and significantly reducing our cash burn by more than 40 percent from March into April,” said Erik Nordstrom, chief executive officer of Nordstrom, Inc. “We’re entering the second quarter in a position of strength, adding to our confidence that we have sufficient liquidity to successfully execute our strategy in 2020 and over the longer term.”

“It is clear we can seamlessly engage with customers through our Nordstrom and Nordstrom Rack brands, across stores and online. We have a unique mix of assets, and the flexibility of our business model continues to serve us well,” said Pete Nordstrom, president and chief brand officer of Nordstrom, Inc. “In 2019, our Off-Price and e-commerce businesses accounted for nearly 60 percent of sales. As we anticipate an acceleration of these longer-term customer trends, we’re taking proactive steps to move faster in executing our strategic plans.”

First Quarter 2020 Summary:
• First quarter net loss of $521 million, which included after-tax charges of $173 million related to COVID-19, decreased from net earnings of $37 million during the same period in fiscal 2019. These charges included asset impairments from store closures, premium pay and benefits, and restructuring charges, which were slightly offset by credits from the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).
• Losses before interest and taxes of $813 million decreased from earnings before interest and taxes (“EBIT”) of $77 million during the same period in fiscal 2019 due to lower sales volume from temporary store closures, increased markdowns and charges related to COVID-19 of $280 million.
• In Full-Price, net sales decreased 36 percent and Off-Price net sales decreased 45 percent compared with the same period in fiscal 2019 due to temporary store closures beginning March 17.
• Online demand, which reflects customer orders and therefore removes the timing impacts of shipments and returns, grew 9 percent, consistent with the second half of 2019. Total company digital sales grew 5 percent to reach $1.1 billion in the first quarter. While stores were temporarily closed, the Company’s e-commerce business experienced significant growth in new customers of more than 50 percent.
• Gross profit, as a percentage of net sales, was 11 percent, decreasing from 34 percent for the same period in fiscal 2019 due to incremental markdowns to clear excess inventory and deleverage from lower sales volume. Ending inventory decreased 26 percent from last year resulting from the Company’s aggressive actions to reduce receipts and clear excess inventory through increased marketing and promotional activities.
• Selling, general and administrative (“SG&A”) expenses, as a percentage of net sales, was 55 percent compared with 34 percent for the same period in fiscal 2019. Excluding charges related to COVID-19 of $250 million, total SG&A decreased approximately 25 percent from last year, primarily due to lower sales volume in addition to reduced overhead labor costs in response to temporary store closures.
• The income tax benefit of $326 million, or 38 percent of pretax loss, reflects a higher projected benefit rate for fiscal 2020 due to the carryback of net operating losses as permitted under the CARES Act.
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