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Nordstrom shows 3Q growth but low prices due to high shelving and labor costs – WWD

Nordstrom Inc., which saw a rise in revenue, reported third-quarter net income of $64 million, compared with $53 million in the same period last year, although the retailer still lags behind in revenue and profit. profits in 2019 and Wall Street sent the company’s stock plunging. up 21.5% in after-hours trading.

Rival retailers include Macy’s Inc. and Kohl’s have exceeded their 2019 performance and have raised their outlook for this year. On the other hand, Nordstrom, which released its third-quarter figures on Tuesday, reaffirmed its outlook for 2021.

Despite beating sales expectations, earnings fell below Wall Street expectations and were dampened by higher labor costs and challenges in the off-Rack pricing division, while the chart Nordstrom – online stores and digital businesses – shows an increase. The fall short of expectations sent Nordstrom shares lower in after-hours trading to $25.07 after closing slightly lower for the day.

Earnings before interest and taxes came in at $127 million for the third quarter ended October 31, compared with $106 million in the same period a year earlier, driven primarily by higher sales volumes and higher profit margins. improved, partly offset by pressure on labor costs.

EBIT was $66 million lower than Q3 FY 2019 due to completion pressures and labor costs, which was partially offset by gains from a cost structure reset in 2020. Last quarter also includes the $19 million tax benefit associated with the CARES Act.

Q3 net revenue increased by 18% year-on-year in fiscal 2020 but down 1% year-on-year in fiscal 2019. The timing of this year’s Anniversary Sale program, with about a week falling in the third quarter, takes place. In 2021, there are positive signs of an impact of about 200 basis points on net revenue compared to fiscal 2019.

During the quarter, net sales of Nordstrom banners increased 3% from the third quarter of fiscal 2019, including a positive impact of approximately 300 basis points from the time of the Anniversary Sale.

Nordstrom Rack’s net revenue last quarter fell 8% from the third quarter of fiscal 2019.

Indoor, active, designer and beauty sales posted the strongest growth compared to the third quarter of 2019. More specifically, designer shoes, designer bags and men’s designer clothing also grew. Good growth, as well as sunglasses and swimwear suggest the tourism industry is getting better.

Geographically, Nordstrom’s comparable store sales in Southern regions, including Southern California, were up 8% from 2019 and outperforming Northern regions. Comparative sales in suburban stores continued to be stronger than inner city stores in the third quarter, both of which improved consistently in the second quarter.

“We have long benefited from our commitment to customer service, new and exciting merchandise, innovative brand partnerships, and interconnected physical and digital assets. However, we need to move faster to capitalize on these strengths and grow market share profitably,” Erik Nordstrom, chief executive officer of Nordstrom Inc., said in a statement.

“We are taking action to improve performance at Nordstrom Rack, including optimizing inventory levels, better balancing price points, and increasing brand awareness,” said Nordstrom. “Work is also underway to improve merchandise margins across the company and ensure we have the visibility and flexibility we need to seamlessly serve our customers, despite these challenges.” challenge the global supply chain.”

New strategies at Rack to improve performance, outlined by Erik and brother Pete Nordstrom, president and chief brand officer during a conference call with retail analysts Tuesday, include:

  • Increase “pack and hold” goods two to three times more to compensate for future supply chain disruptions.
  • Reversing over-reliance on lower-priced goods in certain categories reduces average AUR and puts pressure on activity.
  • Increased selection of “coveted” brands offered at “premium value”.
  • Raise awareness of the Rack brand through the “More Reasons to Queue” marketing campaign launched in September.

“During the third quarter, we made continued progress toward our strategic and financial goals, fueled by strong digital growth, integrated capabilities enabled by Our market strategy and net sales increase at our Nordstrom banner stores, but our focus is on accelerating conversions and improving results. ”

Erik Nordstrom32 2nd Annual Footwear News Achievement Award, Presentation, New York, USA - December 4, 2018

Erik Nordstrom
Andrew H. Walker / Footwear News / REX / Shutterstock

Nordstrom continues to expand the number of customer choices as part of its growing sales strategy. Alternative partnership models beyond traditional wholesale arrangements have grown to nearly 8 percent of total sales, and the company’s recently announced partnership with Fanatics and Asos should provide plenty of it. more categories in new and existing categories for customers without a corresponding increase in the inventory owned by the company.

“Using lessons learned from this year’s Anniversary Sale, the team combined the art of selling with data-driven insights to get the right kind of product,” said Pete Nordstrom, president and chief brand officer. goods in the right place at the right time.

“For the holiday season, we are excited about our plan to use our store network and integrated digital platform to showcase our holiday decor, decor and gift offerings, and at the same time provides a festive experience and convenient services that make shopping easy and enjoyable.”

For fiscal year 2021, the company expects revenue, including retail sales and credit card revenue, to grow by more than 35 percent compared to fiscal 2020; EBIT margin is expected to be around 3 to 3.5% of revenue.

Digital sales fell 12% YoY, with the Anniversary Sale temporarily moving into the third quarter of that year, and up 20% YoY 2019. Digital sales accounted for 40% of total sales for the quarter.



https://wwd.com/business-news/retail/nordstrom-third-quarter-challenges-1235002857/ Nordstrom shows 3Q growth but low prices due to high shelving and labor costs – WWD

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