Nordstrom Q1 2024 Results: A Tale of Two Sides – Sales Soar, Profits Stumble

Fashnopsis:

• Nordstrom’s sales climbed 5.1%, driven by both core and discount brands.
• Nordstrom Rack led the way with a robust 13.8% sales surge.
• Profitability missed expectations with a net loss of $39 million.
• Management cites timing issues for the profit shortfall, but maintains full-year guidance.
• Investor concerns sent the stock price down over 6% in after-hours trading.

Nordstrom Q1 2024 results offered a story of contrasting fortunes. On the one hand, sales figures brought positive news, with a healthy increase across the company. However, profitability fell short of analyst expectations, raising concerns for investors.

Sales Surge Shows Consumer Confidence

Overall net sales climbed a promising 5.1% year-over-year, reaching $3.22 billion. This positive trend was fueled by strong performances from both the core Nordstrom banner and its discount counterpart, Nordstrom Rack.

• Nordstrom Holds Steady: The core Nordstrom brand saw a modest but steady increase of 0.6% in net sales, reaching $2.04 billion. This indicates continued customer loyalty and brand trust in the premium retail segment.
• Nordstrom Rack Rockets: The discount retailer stole the show with a robust 13.8% sales increase, jumping from $1.07 billion in Q1 2023 to $1.2 billion in Q1 2024. This surge highlights the ongoing consumer interest in value-driven shopping experiences.

Profitability Misses the Mark

Despite the positive sales figures, a cloud loomed over the report as Nordstrom revealed a net loss of $39 million, translating to 24 cents per share. This fell significantly short of analyst predictions, who anticipated a loss of only 7 cents per share. This unexpected shortfall in profitability raised concerns about the company’s ability to translate sales growth into sustainable earnings.

Management Cites Timing Issues

Nordstrom’s leadership attributed the profit shortfall to timing issues and inventory adjustments that impacted gross margin. These factors suggest potential short-term hiccups in managing inventory levels and promotional activities. Investors will be keen to see how the company addresses these issues moving forward.

Full-Year Guidance Remains Steady

In a move that may reassure investors, Nordstrom leadership reaffirmed its full-year 2024 guidance despite the Q1 profit miss.

• Revenue Outlook: Revenue is anticipated to range from $3.14 billion to $3.27 billion (based on the 2% decline to 1% increase projection), with an adjustment for an additional week in fiscal 2023. This indicates confidence in the company’s ability to maintain its sales momentum throughout the year.
• Earnings Per Share Projection: The company maintains its earnings per share projection between $1.65 and $2.05. This range reflects a cautious optimism about profitability improvement in the coming quarters.

Other Highlights and Market Reaction

• Digital Sales Show Improvement: While digital sales remained flat year-over-year, they exhibited a positive trend of sequential improvement, indicating potential for future growth in online channels.
• Strong Financial Position: Despite the profit miss, Nordstrom boasts a strong financial position with $1.2 billion in available liquidity and a recent shareholder dividend approval. This provides a financial cushion for navigating challenges and pursuing growth initiatives.
• Market Reacts Negatively: The market, however, reacted negatively to the earnings miss, with Nordstrom’s stock price dropping over 6% in after-hours trading. This underscores investor concerns about the company’s profitability trajectory.

Looking Ahead

While Nordstrom’s Q1 results presented a mixed bag, the company’s strong sales growth and reaffirmed guidance offer reasons for cautious optimism. The coming quarters will be crucial for the company to address profitability concerns and translate sales momentum into sustainable earnings. Investors will be closely watching how Nordstrom navigates these challenges and executes its strategies for the rest of the year.

Image Source: Norstrom