Nordstrom Reports 4th Quarter 2021 Results That Was In Line With Expectations

by · Forbes
Photographer: Jeenah Moon/Bloomberg© 2022 Bloomberg Finance LP

The news was good. Sales increased 23% to $4,4 billion compared to the previous year or $1.23 per fully diluted shares. For the full year the company reported $14.4 billion an increase of 39.1% over the net sales of fiscal 2020. Fully diluted earnings per share for the fiscal year were $1.10 compared to a loss of ($4.39) in the previous year. (It was a coronavirus covid-19 year)

The company’s sales improvement came with strong digital sales growth which accounted for 44% of total sales for the quarter and 42% for the fiscal year. This is a strong showing that is being driven by Nordstrom’s quick delivery or facile pick-up at stores.

Of great interest was progress of Nordstrom Rack stores which hurt performance in the third quarter. Management indicated that The Rack increased profitability and took advantage of the supply chain and inventory flow. It is expected that in fiscal 2022 (ended January 2023) it will meet financial targets that were presented to investors at the annual Investors Day.

Nordstrom made significant progress in merchandise margins as the company engaged customers with compelling holiday gift items and also reduced the promotional activities before Christmas. This is very important for generating better gross margin. Pete Nordstrom said “looing ahead we are focused on more effective balancing of inventory with demand while increasing efficiency throughout our store network and delivering newness and selection to our customers.”

One must note that ending inventory increased 19% compared to the same period last year when a 1% decrease to sales was reported. Management indicated that about half of the inventory increase was due to planned investments to benefit in-stock levels that were reported to be at a low level after the third quarter 2021. This is a clear indication that management has quickly reacted to the Rack situation after the third fiscal quarter.  

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During the conference call Erik Nordstrom or Pete Nordstrom said that there was a lot of stuff in stores. I agree with that assessment as I walked through the 57th Street flagship store in New York. The floors have no focus, and there is no fashion message that one could take home. However, I believe that Pete Nordstrom’s initiative with new brands and DTC brands will pay off. Newness attracts customers and featuring luxury brands will also pay off.  

POSTSCRIPT: The company has indicated that Southern stores in the United States performed much better than Northern stores. That is borne out by Dillard’s who are also showing strong sales in the Southern tier of the United States. While Nordstrom’s Northern storers may have underperformed because of the density of population in the larger cities, it is likely that demand will soon be greater in the North and Nordstrom will benefit from it.