Nordstrom (JWN)’s third quarter 2021 earnings missed expectations, sales exceeded expectations

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A shopper leaves the Nordstrom store in Chicago, Illinois on May 26, 2021.

Scott Olson | Getty Images

Nordstrom’s earnings released on Tuesday were lower than analysts’ expectations, because labor costs eroded profits and sales, and its Nordstrom Rack business could hardly return to pre-pandemic levels.

The news caused it to fall by more than 20% in the extended transaction.

The department store chain is trying to take advantage of shoppers to update their wardrobes when people return to the office and attend social events. Sales in the third quarter exceeded Wall Street’s expectations, but the company only reiterated its revenue forecast for this year.

The disappointing performance is in stark contrast to rivals Macy’s and Kohl’s, which last week raised their expectations for the rest of the year. Both companies have been more successful in passing on higher costs to shoppers and carefully managing inventory.

CEO Erik Nordstrom (Erik Nordstrom) said the company needs to act faster to take advantage of its advantages and increase its market share.

“We are focused on accelerating transformation and improving results,” Erik Nordstrom said in a press release.

Below is Nordstrom’s performance during the three-month period ending October 30, compared to analysts’ expectations using Refinitiv data:

  • Earnings per share: 39 cents vs. 56 cents expected
  • Revenue: 3.64 billion US dollars, compared to 3.55 billion US dollars expected

Net income increased from $53 million or 34 cents per share a year ago to $64 million or 39 cents per share. A survey by Refinitiv shows that analysts have been looking for earnings per share of 56 cents.

Revenue, including credit card sales, climbed to 3.64 billion U.S. dollars from 3.09 billion U.S. dollars a year ago, higher than the expected 3.55 billion U.S. dollars. But this is still a slight decrease from the $3.67 billion reported by Nordstrom in the third quarter of 2019.

In Nordstrom’s department store brand of the same name, revenue increased by 11% from a year ago and increased by 3% on a two-year basis. More customers come to its store, and shoppers spend more on each purchase. Nordstrom ranks home furnishings, active clothing, designer brands and beauty as areas of strength.

In Nordstrom Rack, a low-price division that competes with TJ Maxx and Macy’s Backstage, sales increased by 35% compared to 2020, but dropped by 8% compared to 2019.

The company said it is taking steps to improve Rack’s performance, including investing in increased brand awareness, better management of inventory levels, and price balance to bring it closer to shoppers’ expectations.

Digital sales increased by 12% year-on-year and accounted for 40% of the business. Nordstrom pointed out that last year its annual annual sale (mainly held online and in physical stores) was completely transferred to the third quarter, and this year only dropped within a week of that quarter.

Nordstrom said that compared with the same period in 2019, its inventory levels have increased by 13% because department store operators have postponed some merchandise orders in an attempt to alleviate ongoing supply chain bottlenecks.

It still expects annual revenue, including credit card sales, to increase by more than 35% over last year. Refinitiv data shows that analysts have been looking for 36% growth.

As of Tuesday’s close, Nordstrom’s stock price has risen less than 1% so far this year. Its market value is approximately US$5.1 billion.

Find Nordstrom’s full earnings press release here.

This story is developing. Please check for updates.

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