Nordstrom Inc. sailed into the black during the first quarter, lifted by improvements at the Rack and customers replenishing their wardrobes.
And unlike several other major retailers trimming their projections for 2022 — Target, Walmart, Kohl’s and Abercrombie & Fitch among them — Nordstrom on Tuesday raised its outlook on both sales and profits for this year.
The revised projections lifted Nordstrom stock 10 percent or $2.30, to around $23, in after-market trading Tuesday after the stock earlier had closed down 3.6 percent to $20.68.
The Seattle-based retailer reported first-quarter net earnings of $20 million and earnings per diluted share of 13 cents for the quarter ended April 30, compared to the year-ago loss of $166 million, or $1.05 a share.
Excluding a gain on the sale of the company’s interest in a corporate office building and an impairment charge related to a Trunk Club property, the company posted an adjusted loss per share of 6 cents.
Additionally, first-quarter earnings per share were negatively impacted by 5 cents as a result of discrete tax expenses, primarily related to stock-based compensation, which increased the quarterly effective tax rate by 19.3 percent of pretax earnings. The company continues to expect a full-year income tax rate of approximately 27 percent.
Earnings before interest and tax was $73 million in the first quarter of 2022, compared with loss before interest and taxes of $85 million during the same period in fiscal 2021, primarily due to higher sales volume and improved merchandise margins.
For the first quarter ended April 30, net sales increased 18.7 percent, exceeding pre-pandemic sales levels, and gross merchandise value increased 19.6 percent.
By division, sales at the full-line Nordstrom banner increased 23.5 percent and gross merchandise value increased 24.8 percent.
Net sales for Nordstrom Rack increased 10.3 percent and “continued to show sequential improvement toward pre-pandemic sales levels,” the company said in a statement.
Digital sales were flat compared with the same period in fiscal 2021 as customers increasingly chose to shop in store. Digital sales represented 39 percent of total sales during the quarter.
“Our focus on serving the customer through our interconnected model with Nordstrom and Nordstrom Rack, a scaled digital platform and a strong store fleet positioned us to capitalize on demand from customers who shopped for long-awaited occasions and refreshed their closets,” said Erik Nordstrom, chief executive officer. “In the first quarter, we drove strong top-line growth with broad-based improvement across core categories and geographies. Importantly, we made progress on our strategic initiatives and continue to focus on increasing profitability on the path to achieving our financial targets.”
Nordstrom indicated that in the first quarter, core categories including men’s and women’s apparel, shoes and designer had the strongest growth against 2021 as customers refreshed their wardrobes for occasions such as social events, travel and return to office. Improvements were broad-based across regions, with urban stores having the strongest growth. They were most impacted during the pandemic when families flocked to the suburbs and less densely populated areas to work from home.
Merchandise margins improved as a result of favorable pricing impacts and lower markdown rates.
In a conference call, Nordstrom said Rack last year was “light” on coveted brands, but this year is more in-stock with the brands people want. About 90 percent of the top brands at the Nordstrom banner are sold at Rack.
The CEO also said, “We are sunsetting Trunk Club and redirecting our resources to the services that our customers tell us they value most. I want to be clear: This move reflects our belief and commitment to styling, and we are dedicated to growing and investing in these services. We have a range of styling services, from low touch outfit inspiration through our digital channels to a high-touch and personalized relationship with a stylist, all of which achieve high customer satisfaction scores.” Trunk Club offered styling services to men.
Also during the conference call, Pete Nordstrom, president and chief brand officer, recapped performances by category, indicating men’s apparel was the strongest category last quarter; strength in men’s and women’s apparel was driven especially by suiting and dresses.
“The apparel demand we saw this quarter goes beyond occasions. We also saw robust demand for wardrobe refreshes, especially for the spring and summer seasons. Shoes had strong double-digit growth with increased demand across formal, casual and athletic styles. Our designer offering across all categories continued to perform very well, also posting strong double-digit growth and sales significantly above pre-pandemic levels.”
Pete also said the company benefitted from increased average retail prices, without seeing a negative impact on transaction volumes.
Beginning June 1, Allbirds men’s and women’s shoe styles in select stores will be offered, with plans to launch on nordstrom.com later this summer. Also, Nordstrom is expanding its partnership with Asos, the trendy U.K. brand, with increased distribution to attract more twentysomethings.
For the overall assortment, Nordstrom entered the second quarter with “record high choice count.”