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Details on Industry Insight.
Nordstrom Reports Second Quarter 2011 Earnings
SEATTLE--(BUSINESS WIRE)-- Nordstrom, Inc. (NYSE:JWN - News) today reported net earnings of $175 million, or $0.80 per diluted share, for the second quarter ended July 30, 2011. This represented an increase of 20 percent compared with net earnings of $146 million, or $0.66 per diluted share, for the same quarter last year.
Second quarter same-store sales increased 7.3 percent compared with the same period in fiscal 2010. Net sales in the second quarter were $2.72 billion, an increase of 12.4 percent compared with net sales of $2.42 billion during the same period in fiscal 2010.
SECOND QUARTER SUMMARY
Nordstrom’s second quarter performance benefitted from the company’s continued efforts to enhance the customer experience in stores and online. During the quarter, Nordstrom held three of its five annual promotional events. The Half-Yearly Sale for Women and Kids and the Half-Yearly Sale for Men are both clearance events, while the Anniversary Sale offers new merchandise at a discounted price. All of these events achieved same-store sales increases, reflecting strong execution.
Nordstrom net sales, which include results from the full-line and Direct businesses, increased $186 million, or 8.8 percent, compared with the same period in fiscal 2010, with same-store sales up 7.9 percent. Top-performing merchandise categories included Shoes, Cosmetics and Designer.
The South and Midwest regions were the top-performing geographic areas for full-line stores relative to the second quarter of 2010. The Direct channel continued to show strong sales growth, outpacing the overall Nordstrom increase.
Nordstrom Rack net sales increased $92 million, or 23.4 percent, compared with the same period in fiscal 2010, with same-store sales up 4.8 percent.
Gross profit, as a percentage of net sales, increased approximately 135 basis points compared with last year’s second quarter. The improvement was driven by increases in gross margin from continued strength in regular-price selling and inventory turn, and to a lesser extent, by the ability to leverage buying and occupancy expenses during the quarter.
Retail selling, general and administrative expenses increased $95 million compared with last year’s second quarter. The increase is primarily due to higher sales volume, HauteLook operating and purchase accounting expenses and 21 new stores since last year’s second quarter.
The Credit segment continued to contribute to an improved customer experience and to overall performance. Customer payment rates increased, resulting in improved delinquency and write-off trends, and a corresponding decrease in finance charge revenue. Annualized net write-offs were 7.2 percent of average credit card receivables during the quarter, down from 9.0 percent in the second quarter of 2010.
Delinquencies as a percentage of credit card receivables at the end of the second quarter were 2.7 percent, down from 3.5 percent at the end of the second quarter of 2010. As a result, the reserve for bad debt was reduced by $10 million to $125 million.
Earnings before interest and taxes increased $48 million to $320 million, or 11.4 percent of total revenues, from $272 million, or 10.8 percent of total revenues, in last year’s second quarter. This year’s second quarter earnings before interest and taxes were reduced by approximately $13 million, or $0.05 per share, related to HauteLook, including purchase accounting charges and the impact from share dilution. This reduction in earnings from HauteLook was in line with the company’s internal plans.
FISCAL YEAR 2011 OUTLOOK
The company’s revised expectations for fiscal 2011 are as follows:
Same-store sales 4 to 6 percent increase
HauteLook sales1 $160 to $180 million
Credit card revenues $0 to $10 million decrease
Gross profit (%) 30 to 50 basis point increase
Retail selling, general and administrative expenses ($)2 $310 to $350 million increase
Credit selling, general and administrative expenses ($) $20 to $30 million decrease
Interest expense, net $0 to $5 million decrease
Effective tax rate 39.4 percent
Earnings per diluted share $2.95 to $3.10
Diluted shares outstanding 219.9 million
1HauteLook sales are not included in same-store sales.
2Retail SG&A expenses include approximately $115 million of operating expenses and purchase accounting charges associated with the HauteLook acquisition.
CONFERENCE CALL INFORMATION
The company’s senior management will host a conference call to discuss second quarter results at 4:45 p.m. Eastern Daylight Time today. To listen, please dial 517-308-9140 (passcode: NORD). A telephone replay will be available beginning approximately one hour after the conclusion of the call by dialing 203-369-1658 (passcode: 6673) until the close of business on August 18, 2011. Interested parties may also listen to the live call over the Internet by visiting the Investor Relations section of the company’s corporate Web site at http://investor.nordstrom.com. An archived webcast will be available in the webcasts section for one year.
Nordstrom, Inc. is one of the nation's leading fashion specialty retailers, with 213 stores located in 29 states. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 115 Nordstrom full-line stores, 95 Nordstrom Rack stores, two Jeffrey boutiques and one clearance store. Nordstrom serves customers through its online presence at www.Nordstrom.com and through its catalogs. Nordstrom also 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.