UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 26, 2024
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices)
Registrant’s telephone number, including area code (206 ) 628-2111
Inapplicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02 Results of Operations and Financial Condition
On November 26, 2024 , Nordstrom, Inc. issued an earnings release announcing its results of operations for the quarter and nine months ended November 2, 2024, its financial position as of November 2, 2024, and its cash flows for the nine months ended November 2, 2024 ("Third Quarter Results"). A copy of this earnings release is furnished as Exhibit 99.1.
ITEM 7.01 Regulation FD Disclosure
On November 26, 2024 , Nordstrom, Inc. issued an earnings release announcing its Third Quarter Results. A copy of this earnings release is furnished as Exhibit 99.1.
In addition, furnished hereby and incorporated by reference herein is the earnings call commentary on its Third Quarter Results and 2024 financial outlook, as posted on the Company's investor relations website, investor.nordstrom.com, on November 26, 2024 . A copy of this earnings call commentary is furnished as Exhibit 99.2.
The information furnished in this Item 7.01 shall not be deemed "filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing, except as shall be expressly set forth by a specific reference in such filing.
ITEM 9.01 Financial Statements and Exhibits
Nordstrom earnings release dated | |||||
Nordstrom earnings call commentary relating to the Company's Third Quarter Results and 2024 financial outlook | |||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NORDSTROM, INC. | |||||
| (Registrant) | |||||
| /s/ Catherine R. Smith | |||||
| Catherine R. Smith | |||||
| Chief Financial Officer | |||||
Date: November 26, 2024
Nordstrom Reports Third Quarter 2024 Earnings
•Positive sales growth at both banners during third quarter, driving margin expansion
•Reports EPS of $0.27, adjusted EPS of $0.331
•Updates fiscal 2024 revenue and comparable sales outlook
SEATTLE – November 26, 2024 – Nordstrom, Inc. (NYSE: JWN) today reported third quarter net earnings of $46 million, or earnings per diluted share (“EPS”) of $0.27, and earnings before interest and taxes (“EBIT”) of $83 million. Excluding a charge related to accelerated technology depreciation, the Company reported adjusted EBIT of $97 million and adjusted EPS of $0.33.1
For the third quarter ended November 2, 2024, net sales increased 4.6 percent versus the same period in fiscal 2023, and total Company comparable sales increased 4.0 percent. Gross merchandise value (“GMV”) increased 5.3 percent. Anniversary Sale timing, with one week shifting from the third quarter to the second quarter, had a negative impact of approximately 100 basis points on net sales compared with 2023. During the quarter, Nordstrom banner net sales increased 1.3 percent and comparable sales increased 4.0 percent. Net sales for Nordstrom Rack increased 10.6 percent and comparable sales increased 3.9 percent.
“The continued sales growth across the company and strong gross margin in the third quarter indicate our team’s focus and efforts are working,” said Erik Nordstrom, chief executive officer of Nordstrom, Inc. “Our customers have a lot of choices, and our results give us encouragement that we’re on the right path. Looking ahead, we’ll continue to improve our shopping experience as we strive to maintain the positive momentum we’ve worked towards all year.”
In the third quarter, women’s apparel and active had double-digit growth, and shoes, men’s apparel and kids were up mid to high single-digits, versus 2023. Growth in women’s apparel, shoes and men’s apparel accelerated sequentially from the second quarter.
“Our third quarter results demonstrate that our strategic focus on curating a compelling brand assortment is resonating with customers,” said Pete Nordstrom, president of Nordstrom, Inc. “Our actions throughout this year have led to this moment, and we feel well-positioned for a successful holiday season and look forward to helping our customers celebrate the moments that matter. I’m grateful to our dedicated team for consistently delivering the high level of service our customers have come to expect from Nordstrom.”
As previously announced, the board of directors declared a quarterly cash dividend of $0.19 per share, payable on December 18, 2024, to shareholders of record at the close of business on December 3, 2024.
THIRD QUARTER 2024 SUMMARY
•Total Company net sales increased 4.6 percent and comparable sales increased 4.0 percent compared with the same period in fiscal 2023. GMV increased 5.3 percent. The timing shift of the Anniversary Sale, with one day falling in the third quarter of 2024 versus eight days in 2023, had a negative impact on net sales of approximately 100 basis points compared with the third quarter of 2023.
•Nordstrom banner net sales increased 1.3 percent and comparable sales increased 4.0 percent compared with the same period in fiscal 2023. GMV increased 2.4 percent. The timing shift of the Anniversary Sale had a negative impact on Nordstrom banner net sales of approximately 200 basis points compared with the third quarter of 2023.
•Nordstrom Rack banner net sales increased 10.6 percent and comparable sales increased 3.9 percent compared with the same period in fiscal 2023.
•Digital sales increased 6.4 percent compared with the same period in fiscal 2023. The timing shift of the Anniversary Sale had a negative impact on Company digital sales of approximately 100 basis points compared with the third quarter of 2023. Digital sales represented 34 percent of total sales during the quarter.
•Gross profit, as a percentage of net sales, of 35.6 percent increased 60 basis points compared with 35.0 percent in the same period in fiscal 2023, primarily due to strong regular price sales.
1Adjusted EBIT and adjusted EPS are non-GAAP financial measures. Refer to the “Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT Margin and Adjusted EPS” section of this release for additional information as well as reconciliations between the Company’s GAAP and non-GAAP financial results.
•Ending inventory increased 5.9 percent compared with the same period in fiscal 2023, versus a 4.6 percent increase in sales.
•Selling, general and administrative (“SG&A”) expenses, as a percentage of net sales, of 36.6 percent increased 25 basis points compared with 36.3 percent in the same period in fiscal 2023, primarily due to higher labor costs and a charge related to accelerated technology depreciation, partially offset by leverage on higher sales and improvements in variable costs across the business. Excluding the $14 million charge related to accelerated technology depreciation, adjusted SG&A expenses, as a percentage of net sales, were 36.2 percent.
•EBIT was $83 million in the third quarter of 2024, compared with $102 million during the same period in fiscal 2023. Adjusted EBIT of $97 million in the third quarter of 2024 excluded the accelerated technology depreciation. Adjusted EBIT of $77 million in the third quarter of 2023 excluded a favorable $25 million true-up related to the wind-down of Canadian operations.2
•Interest expense, net, of $26 million increased 8.8 percent compared with $24 million during the same period in fiscal 2023 primarily due to lower interest income.
•Income tax expense was $11 million, or 18.9 percent of pretax earnings, compared with income tax expense of $11 million, or 14.2 percent of pretax earnings, in the same period in fiscal 2023. The increase in the rate in the third quarter of fiscal 2024 was driven primarily by tax benefits in the third quarter of fiscal 2023 associated with the wind-down of Canadian operations.
•The Company ended the third quarter with $1.2 billion in available liquidity, including $397 million in cash.
STORES UPDATE
To date in fiscal 2024, the Company has opened 23 stores:
| City | Location | Square Footage (000s) | Timing of Opening | |||||||||||||||||
| Nordstrom Rack | ||||||||||||||||||||
| Pinole, CA | Pinole Vista Crossing | 23 | March 7, 2024 | |||||||||||||||||
| Snellville, GA | Presidential Markets | 35 | March 7, 2024 | |||||||||||||||||
| Kennesaw, GA | Barrett Place | 25 | March 21, 2024 | |||||||||||||||||
| Macedonia, OH | Macedonia Gateway | 28 | April 11, 2024 | |||||||||||||||||
| Gilroy, CA | Gilroy Crossing | 25 | April 25, 2024 | |||||||||||||||||
| Jacksonville Beach, FL | South Beach Regional | 30 | May 2, 2024 | |||||||||||||||||
| Queen Creek, AZ | Queen Creek Marketplace | 28 | May 16, 2024 | |||||||||||||||||
| Elk Grove, CA | The Ridge Elk Grove | 25 | May 30, 2024 | |||||||||||||||||
| Wheaton, IL | Danada Square East | 29 | May 30, 2024 | |||||||||||||||||
| Oceanside, CA | Pacific Coast Plaza | 32 | June 6, 2024 | |||||||||||||||||
| Bay Shore, NY | Gardiner Manor Mall | 24 | June 13, 2024 | |||||||||||||||||
| San Antonio, TX | Bandera Pointe | 24 | September 5, 2024 | |||||||||||||||||
| Franklin, TN | Cool Springs Market | 24 | September 5, 2024 | |||||||||||||||||
| San Mateo, CA | Bridgepointe Shopping Center | 36 | September 12, 2024 | |||||||||||||||||
| San Diego, CA | Clairemont Town Square | 25 | September 19, 2024 | |||||||||||||||||
| Mooresville, NC | Mooresville Crossing | 28 | September 26, 2024 | |||||||||||||||||
| Houston, TX | Meyerland Plaza | 34 | September 26, 2024 | |||||||||||||||||
| Mason, OH | Deerfield Towne Center | 30 | October 3, 2024 | |||||||||||||||||
| Raleigh, NC | Triangle Town Place | 32 | October 10, 2024 | |||||||||||||||||
| Fort Myers, FL | Bell Tower | 31 | October 17, 2024 | |||||||||||||||||
| Noblesville, IN | Hamilton Town Center | 25 | October 17, 2024 | |||||||||||||||||
| Omaha, NE | Village Pointe | 30 | October 24, 2024 | |||||||||||||||||
| Tarzana, CA | Village Walk | 25 | November 1, 2024 | |||||||||||||||||
2Adjusted EBIT is a non-GAAP financial measure. Refer to the “Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT Margin and Adjusted EPS” section of this release for additional information as well as reconciliations between the Company’s GAAP and non-GAAP financial results.
The Company has also announced plans to open the following stores:
| City | Location | Square Footage (000s) | Timing of Opening | |||||||||||||||||
| Nordstrom Rack | ||||||||||||||||||||
| Davis, CA | The Davis Collection | 25 | Spring 2025 | |||||||||||||||||
| Matthews, NC | Sycamore Commons | 25 | Spring 2025 | |||||||||||||||||
| Geneva, IL | Randall Square | 25 | Spring 2025 | |||||||||||||||||
| Manalapan Township, NJ | Manalapan Commons | 26 | Spring 2025 | |||||||||||||||||
| Apple Valley, MN | Fischer Marketplace | 30 | Spring 2025 | |||||||||||||||||
| Houston, TX | Westchase Shopping Center | 30 | Spring 2025 | |||||||||||||||||
| Morrisville, NC | Park West Village | 25 | Spring 2025 | |||||||||||||||||
| Coral Springs, FL | Pine Ridge Square | 31 | Fall 2025 | |||||||||||||||||
| Surprise, AZ | Prasada North | 26 | Fall 2025 | |||||||||||||||||
| Holbrook, NY | The Shops at SunVet | 27 | Fall 2025 | |||||||||||||||||
| Hyannis, MA | The Landing at Hyannis | 25 | Fall 2025 | |||||||||||||||||
| Prosper, TX | The Gates of Prosper | 26 | Fall 2025 | |||||||||||||||||
| Melbourne, FL | The Avenue Viera | 24 | Fall 2025 | |||||||||||||||||
| Meridian, ID | The Village at Meridian | 25 | Fall 2025 | |||||||||||||||||
| Lakeland, FL | Lakeside Village | 30 | Fall 2025 | |||||||||||||||||
| Sarasota, FL | Sarasota Pavilion | 27 | Spring 2026 | |||||||||||||||||
The Company had the following store counts as of quarter-end:
| November 2, 2024 | October 28, 2023 | ||||||||||
| Nordstrom | |||||||||||
Nordstrom | 93 | 93 | |||||||||
| Nordstrom Local service hubs | 6 | 6 | |||||||||
| ASOS | Nordstrom | — | 1 | |||||||||
| Nordstrom Rack | |||||||||||
Nordstrom Rack | 280 | 258 | |||||||||
| Last Chance clearance stores | 2 | 2 | |||||||||
| Total | 381 | 360 | |||||||||
| Gross store square footage | 26,874,000 | 26,305,000 | |||||||||
During the third quarter, the Company closed one Nordstrom Rack store.
FISCAL YEAR 2024 OUTLOOK
The Company updated its financial outlook for fiscal 2024, which reflects the estimated accelerated technology depreciation impacts expected in the fourth quarter of fiscal 2024:
•Revenue range, including retail sales and credit card revenues, of flat to 1.0 percent growth versus the 53-week fiscal 2023, which includes an approximately 135 basis point unfavorable impact from the 53rd week
•Comparable sales growth of 1.0 to 2.0 percent versus 52 weeks in fiscal 2023
•EBIT margin of 3.0 to 3.4 percent of sales
•Adjusted EBIT margin of 3.6 to 4.0 percent of sales3
•Income tax rate of approximately 27 percent
3Adjusted EBIT margin is a non-GAAP financial measure. Refer to the “Forward-Looking Non-GAAP Measures” section of this release for additional information as well as reconciliations between the Company’s GAAP and non-GAAP financial expectations.
•EPS of $1.40 to $1.70, excluding the impact of share repurchase activity, if any
•Adjusted EPS of $1.75 to $2.05, excluding the impact of share repurchase activity, if any4
CONFERENCE CALL INFORMATION
The Company’s senior management will host a conference call to provide a business update and to discuss third quarter 2024 financial results and fiscal 2024 outlook at 4:45 p.m. EST today. To listen to the live call online and view the speakers’ prepared remarks and the conference call slides, visit the Investor Relations section of the Company’s corporate website at investor.nordstrom.com. An archived webcast with the speakers’ prepared remarks and the conference call slides will be available in the Quarterly Results section for one year. Interested parties may also dial 201-689-8354. A telephone replay will be available beginning approximately three hours after the conclusion of the call by dialing 877-660-6853 or 201-612-7415 and entering Conference ID 13750079, until the close of business on December 3, 2024.
ABOUT NORDSTROM
At Nordstrom, Inc. (NYSE: JWN), we exist to help our customers feel good and look their best. Since starting as a shoe store in 1901, how to best serve customers has been at the center of every decision we make. This heritage of service is the foundation we’re building on as we provide convenience and true connection for our customers. Our interconnected model enables us to serve customers when, where and how they want to shop – whether that’s in-store at more than 350 Nordstrom, Nordstrom Local and Nordstrom Rack locations or digitally through our Nordstrom and Rack apps and websites. Through it all, we remain committed to leaving the world better than we found it.
Certain statements in this press release contain or may suggest “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involves risks and uncertainties that could cause results to be materially different from expectations. The words “will,” “may,” “designed to,” “outlook,” “believes,” “should,” “targets,” “anticipates,” “assumptions,” “plans,” “expects” or “expectations,” “intends,” “estimates,” “forecasts,” “guidance” and similar expressions identify certain of these forward-looking statements. The Company also may provide forward-looking statements in oral statements or other written materials released to the public. All statements contained or incorporated in this press release or in any other public statements that address such future events or expectations are forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements are detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2024, our Form 10-Q for the fiscal quarter ended May 4, 2024, our Form 10-Q for the fiscal quarter ended August 3, 2024 and our Form 10-Q for the fiscal quarter ended November 2, 2024, to be filed with the SEC on or about December 5, 2024. In addition, forward-looking statements contained in this release may be impacted by the actual outcome of events or occurrences related to the Company’s announcement of the exploration of possible avenues to enhance shareholder value, including consideration by a special committee of the board of directors of a proposal brought forward by members of the Nordstrom family to take the Company private. These forward-looking statements are not guarantees of future performance and speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances. In addition, the actual timing, price, manner and amounts of future share repurchases, if any, will be subject to the discretion of our board of directors, contractual commitments, market and economic conditions and applicable Securities and Exchange Commission rules. This earnings release includes references to websites, website addresses and additional materials, including reports and blogs, found on those websites. The content of any websites and materials named, hyperlinked or otherwise referenced in this earnings release are not incorporated by reference into this earnings release or in any other report or document we file with the SEC, and any references to such websites and materials are intended to be inactive textual references only. The information on those websites is not part of this earnings release.
4Adjusted EPS is a non-GAAP financial measure. Refer to the “Forward-Looking Non-GAAP Measures” section of this release for additional information as well as reconciliations between the Company’s GAAP and non-GAAP financial expectations.
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited; amounts in millions, except per share amounts)
| Quarter Ended | Nine Months Ended | ||||||||||||||||
| November 2, 2024 | October 28, 2023 | November 2, 2024 | October 28, 2023 | ||||||||||||||
| Net sales | $3,347 | $3,200 | $10,353 | $9,926 | |||||||||||||
| Credit card revenues, net | 117 | 120 | 339 | 347 | |||||||||||||
| Total revenues | 3,464 | 3,320 | 10,692 | 10,273 | |||||||||||||
Cost of sales and related buying and occupancy costs | (2,156) | (2,080) | (6,760) | (6,488) | |||||||||||||
| Selling, general and administrative expenses | (1,225) | (1,163) | (3,680) | (3,466) | |||||||||||||
| Canada wind-down costs | — | 25 | — | (284) | |||||||||||||
| Earnings before interest and income taxes | 83 | 102 | 252 | 35 | |||||||||||||
| Interest expense, net | (26) | (24) | (79) | (78) | |||||||||||||
| Earnings (loss) before income taxes | 57 | 78 | 173 | (43) | |||||||||||||
| Income tax (expense) benefit | (11) | (11) | (45) | 43 | |||||||||||||
| Net earnings | $46 | $67 | $128 | $— | |||||||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $0.28 | $0.41 | $0.78 | $— | |||||||||||||
| Diluted | $0.27 | $0.41 | $0.76 | $— | |||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||
| Basic | 164.6 | 162.0 | 164.0 | 161.5 | |||||||||||||
| Diluted | 169.8 | 163.6 | 168.1 | 161.5 | |||||||||||||
| Percent of net sales: | |||||||||||||||||
| Gross profit | 35.6 | % | 35.0 | % | 34.7 | % | 34.6 | % | |||||||||
| Selling, general and administrative expenses | 36.6 | % | 36.3 | % | 35.5 | % | 34.9 | % | |||||||||
| Earnings before interest and income taxes | 2.5 | % | 3.2 | % | 2.4 | % | 0.4 | % | |||||||||
NORDSTROM, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in millions)
| November 2, 2024 | February 3, 2024 | October 28, 2023 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $397 | $628 | $375 | ||||||||
| Accounts receivable, net | 544 | 334 | 322 | ||||||||
| Merchandise inventories | 2,780 | 1,888 | 2,626 | ||||||||
| Prepaid expenses and other current assets | 311 | 286 | 392 | ||||||||
| Total current assets | 4,032 | 3,136 | 3,715 | ||||||||
Land, property and equipment (net of accumulated depreciation of $8,623, $8,251 and $8,258) | 3,041 | 3,177 | 3,187 | ||||||||
| Operating lease right-of-use assets | 1,438 | 1,359 | 1,402 | ||||||||
| Goodwill | 249 | 249 | 249 | ||||||||
| Other assets | 560 | 523 | 460 | ||||||||
| Total assets | $9,320 | $8,444 | $9,013 | ||||||||
| Liabilities and Shareholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $1,863 | $1,236 | $1,890 | ||||||||
| Accrued salaries, wages and related benefits | 355 | 244 | 245 | ||||||||
| Current portion of operating lease liabilities | 246 | 240 | 232 | ||||||||
| Other current liabilities | 1,068 | 1,102 | 1,092 | ||||||||
| Current portion of long-term debt | — | 250 | 250 | ||||||||
| Total current liabilities | 3,532 | 3,072 | 3,709 | ||||||||
| Long-term debt, net | 2,617 | 2,612 | 2,611 | ||||||||
| Noncurrent operating lease liabilities | 1,448 | 1,377 | 1,403 | ||||||||
| Other liabilities | 736 | 535 | 561 | ||||||||
| Commitments and contingencies | |||||||||||
| Shareholders’ equity: | |||||||||||
Common stock, no par value: 1,000 shares authorized; 164.9, 162.4 and 162.3 shares issued and outstanding | 3,483 | 3,418 | 3,407 | ||||||||
| Accumulated deficit | (2,504) | (2,578) | (2,681) | ||||||||
| Accumulated other comprehensive gain | 8 | 8 | 3 | ||||||||
| Total shareholders’ equity | 987 | 848 | 729 | ||||||||
| Total liabilities and shareholders’ equity | $9,320 | $8,444 | $9,013 | ||||||||
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; amounts in millions)
| Nine Months Ended | ||||||||
| November 2, 2024 | October 28, 2023 | |||||||
| Operating Activities | ||||||||
| Net earnings | $128 | $— | ||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
| Depreciation and amortization expenses | 468 | 430 | ||||||
| Canada wind-down costs | — | 207 | ||||||
| Asset impairment | 51 | — | ||||||
| Right-of-use asset amortization | 140 | 132 | ||||||
| Deferred income taxes, net | (72) | 2 | ||||||
| Stock-based compensation expense | 57 | 41 | ||||||
| Other, net | (14) | (61) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivables, net | (220) | (58) | ||||||
| Merchandise inventories | (747) | (687) | ||||||
| Prepaid expenses and other assets | (2) | (82) | ||||||
| Accounts payable | 429 | 509 | ||||||
| Accrued salaries, wages and related benefits | 111 | (41) | ||||||
| Other current liabilities | 4 | (90) | ||||||
| Lease liabilities | (199) | (203) | ||||||
| Other liabilities | 237 | 8 | ||||||
| Net cash provided by operating activities | 371 | 107 | ||||||
| Investing Activities | ||||||||
| Capital expenditures | (321) | (375) | ||||||
| Decrease in cash and cash equivalents resulting from Canada deconsolidation | — | (33) | ||||||
| Proceeds from the sale of assets and other, net | 27 | 32 | ||||||
| Net cash used in investing activities | (294) | (376) | ||||||
| Financing Activities | ||||||||
| Principal payments on long-term debt | (250) | — | ||||||
| Change in cash book overdrafts | 28 | 37 | ||||||
| Cash dividends paid | (93) | (92) | ||||||
| Payments for repurchase of common stock | — | (1) | ||||||
| Proceeds from issuances under stock compensation plans | 19 | 19 | ||||||
| Other, net | (12) | (6) | ||||||
| Net cash used in financing activities | (308) | (43) | ||||||
| Net decrease in cash and cash equivalents | (231) | (312) | ||||||
| Cash and cash equivalents at beginning of period | 628 | 687 | ||||||
| Cash and cash equivalents at end of period | $397 | $375 | ||||||
NORDSTROM, INC.
ADJUSTED EBIT, ADJUSTED EBITDA, ADJUSTED EBIT MARGIN AND ADJUSTED EPS
(NON-GAAP FINANCIAL MEASURES)
(unaudited; amounts in millions, except per share amounts)
The following are key financial metrics and, when used in conjunction with GAAP measures, we believe they provide useful information for evaluating our core business performance, enable comparison of financial results across periods and allow for greater transparency with respect to key metrics used by management for financial and operational decision-making. Adjusted EBIT, adjusted EBITDA, adjusted EBIT margin and adjusted EPS exclude certain items that we do not consider representative of our core operating performance. The financial measure calculated under GAAP which is most directly comparable to adjusted EBIT and adjusted EBITDA is net earnings. The financial measure calculated under GAAP which is most directly comparable to adjusted EBIT margin is net earnings as a percent of net sales. The financial measure calculated under GAAP which is most directly comparable to adjusted EPS is diluted EPS.
Adjusted EBIT, adjusted EBITDA, adjusted EBIT margin and adjusted EPS are not measures of financial performance under GAAP and should be considered in addition to, and not as a substitute for, net earnings, net earnings as a percent of net sales, operating cash flows, earnings per share, earnings per diluted share or other financial measures performed in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies’ financial measures and therefore may not be comparable to methods used by other companies.
The following is a reconciliation of net earnings to adjusted EBIT and adjusted EBITDA and net earnings as a percent of net sales to adjusted EBIT margin:
| Quarter Ended | Nine Months Ended | ||||||||||||||||
| November 2, 2024 | October 28, 2023 | November 2, 2024 | October 28, 2023 | ||||||||||||||
| Net earnings | $46 | $67 | $128 | $— | |||||||||||||
| Income tax expense (benefit) | 11 | 11 | 45 | (43) | |||||||||||||
| Interest expense, net | 26 | 24 | 79 | 78 | |||||||||||||
| Earnings before interest and income taxes | 83 | 102 | 252 | 35 | |||||||||||||
Accelerated technology depreciation1 | 14 | — | 14 | — | |||||||||||||
| Supply chain asset impairment and other | — | — | 54 | — | |||||||||||||
| Canada wind-down costs | — | (25) | — | 284 | |||||||||||||
| Adjusted EBIT | 97 | 77 | 320 | 319 | |||||||||||||
| Depreciation and amortization expenses | 148 | 145 | 451 | 430 | |||||||||||||
| Amortization of developer reimbursements | (14) | (17) | (44) | (52) | |||||||||||||
| Adjusted EBITDA | $231 | $205 | $727 | $697 | |||||||||||||
| Net sales | $3,347 | $3,200 | $10,353 | $9,926 | |||||||||||||
Net earnings as a % of net sales | 1.4 | % | 2.1 | % | 1.2 | % | — | % | |||||||||
| EBIT margin | 2.5 | % | 3.2 | % | 2.4 | % | 0.4 | % | |||||||||
| Adjusted EBIT margin | 2.9 | % | 2.4 | % | 3.1 | % | 3.2 | % | |||||||||
1 As a result of a strategic decision, we recognized a charge related to incremental accelerated depreciation for a technology asset, which we will deprecate in the fourth quarter of 2024. The charge is included in our Corporate/Other SG&A expense on the Condensed Consolidated Statement of Earnings and depreciation and amortization expenses on the Condensed Consolidated Statement of Cash Flows.
The following is a reconciliation of diluted EPS to adjusted EPS:
| Quarter Ended | Nine Months Ended | ||||||||||||||||
| November 2, 2024 | October 28, 2023 | November 2, 2024 | October 28, 2023 | ||||||||||||||
| Diluted EPS | $0.27 | $0.41 | $0.76 | $— | |||||||||||||
| Accelerated technology depreciation | 0.08 | — | 0.08 | — | |||||||||||||
| Supply chain asset impairment and other | — | — | 0.32 | — | |||||||||||||
| Canada wind-down costs | — | (0.15) | — | 1.74 | |||||||||||||
Income tax impact on adjustments1 | (0.02) | (0.01) | (0.10) | (0.58) | |||||||||||||
| Adjusted EPS | $0.33 | $0.25 | $1.06 | $1.16 | |||||||||||||
1 The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate for the respective non-GAAP adjustment.
NORDSTROM, INC.
SUMMARY OF NET SALES
(unaudited; amounts in millions)
Our Nordstrom brand includes Nordstrom.com, Nordstrom U.S. stores and Nordstrom Local. Nordstrom also included Canada operations prior to March 2, 2023, inclusive of Nordstrom.ca, Nordstrom Canadian stores and Nordstrom Rack Canadian stores, and ASOS | Nordstrom prior to December 2023. Our Nordstrom Rack brand includes NordstromRack.com, Nordstrom Rack U.S. stores and Last Chance clearance stores. The following table summarizes net sales for the quarter and nine months ended November 2, 2024, compared with the quarter and nine months ended October 28, 2023:
| Quarter Ended | Nine Months Ended | ||||||||||||||||
| November 2, 2024 | October 28, 2023 | November 2, 2024 | October 28, 2023 | ||||||||||||||
| Net sales: | |||||||||||||||||
| Nordstrom | $2,077 | $2,051 | $6,632 | $6,570 | |||||||||||||
| Nordstrom Rack | 1,270 | 1,149 | 3,721 | 3,356 | |||||||||||||
| Total net sales | $3,347 | $3,200 | $10,353 | $9,926 | |||||||||||||
| Net sales increase (decrease): | |||||||||||||||||
| Nordstrom | 1.3 | % | (9.4 | %) | 1.0 | % | (10.3 | %) | |||||||||
| Nordstrom Rack | 10.6 | % | (1.8 | %) | 10.9 | % | (5.9 | %) | |||||||||
| Total Company | 4.6 | % | (6.8 | %) | 4.3 | % | (8.9 | %) | |||||||||
Digital sales as % of total net sales1 | 34 | % | 34 | % | 35 | % | 35 | % | |||||||||
1 Sales conducted through a digital platform such as our websites or mobile apps. Digital sales may be self-guided by the customer, as in a traditional online order, or facilitated by a salesperson using a virtual styling or selling tool. Digital sales may be delivered to the customer or picked up in our Nordstrom stores, Nordstrom Rack stores or Nordstrom Local service hubs. Digital sales also includes a reserve for estimated returns.
NORDSTROM, INC.
FISCAL YEAR 2024 FORWARD-LOOKING NON-GAAP MEASURES
(NON-GAAP FINANCIAL MEASURES)
(unaudited)
Our adjusted EBIT as a percent of net sales (“adjusted EBIT margin”) and adjusted EPS outlook for fiscal year 2024 excludes the impacts from certain items that we do not consider representative of our core operating performance. These items include charges primarily related to a supply chain asset impairment in the second quarter of 2024 and accelerated technology depreciation to be recognized in the second half of fiscal 2024.
The following is a reconciliation of expected net earnings as a percent of net sales to expected adjusted EBIT margin included within our Fiscal Year 2024 Outlook:
52 Weeks Ending February 1, 2025 | |||||||||||
| Low | High | ||||||||||
| Expected net earnings as a % of net sales | 1.7% | 2.0% | |||||||||
| Income tax expense | 0.6% | 0.7% | |||||||||
| Interest expense, net | 0.7% | 0.7% | |||||||||
| Expected EBIT as a % of net sales | 3.0% | 3.4% | |||||||||
| Supply chain asset impairment and other | 0.4% | 0.4% | |||||||||
| Accelerated technology depreciation | 0.2% | 0.2% | |||||||||
| Expected adjusted EBIT margin | 3.6% | 4.0% | |||||||||
The following is a reconciliation of expected diluted EPS to expected adjusted EPS included within our Fiscal Year 2024 Outlook:
52 Weeks Ending February 1, 2025 | |||||||||||
| Low | High | ||||||||||
| Expected diluted EPS | $1.40 | $1.70 | |||||||||
| Supply chain asset impairment and other | 0.32 | 0.32 | |||||||||
| Accelerated technology depreciation | 0.15 | 0.15 | |||||||||
| Income tax impact on adjustments | (0.12) | (0.12) | |||||||||
| Expected adjusted EPS | $1.75 | $2.05 | |||||||||
NORDSTROM, INC.
ADJUSTED RETURN ON INVESTED CAPITAL (“ADJUSTED ROIC”)
(NON-GAAP FINANCIAL MEASURE)
(unaudited; amounts in millions)
We believe that Adjusted ROIC is a useful financial measure for investors in evaluating the efficiency and effectiveness of the capital we have invested in our business to generate returns over time. Our Adjusted ROIC calculation excludes certain items that we do not consider representative of our core operating performance.
Adjusted ROIC is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, return on assets, net earnings, total assets or other GAAP financial measures. Our method of calculating a non-GAAP financial measure may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted ROIC is return on assets. The following shows the components to reconcile the return on assets calculation to Adjusted ROIC:
| Four Quarters Ended | ||||||||
| November 2, 2024 | October 28, 2023 | |||||||
| Net earnings | $263 | $119 | ||||||
| Income tax expense (benefit) | 99 | (2) | ||||||
| Interest expense | 137 | 136 | ||||||
| Earnings before interest and income tax expense | 499 | 253 | ||||||
Operating lease interest1 | 90 | 86 | ||||||
Non-operating related adjustments2 | 99 | 284 | ||||||
| Adjusted net operating profit | 688 | 623 | ||||||
Adjusted estimated income tax expense3 | (187) | (144) | ||||||
| Adjusted net operating profit after tax | $501 | $479 | ||||||
| Average total assets | $8,779 | $8,956 | ||||||
Average noncurrent deferred property incentives in excess of operating lease right-of-use (ROU) assets4 | (128) | (167) | ||||||
| Average non-interest bearing current liabilities | (2,992) | (3,134) | ||||||
Non-operating related adjustments2 | 44 | 294 | ||||||
| Adjusted average invested capital | $5,703 | $5,949 | ||||||
| Return on assets | 3.0 | % | 1.3 | % | ||||
| Adjusted ROIC | 8.8 | % | 8.1 | % | ||||
1 Operating lease interest is a component of operating lease cost recorded in occupancy costs. We add back operating lease interest for purposes of calculating adjusted net operating profit for consistency with the treatment of interest expense on our debt.
2 Non-operating related adjustments primarily included supply chain impairment charges and accelerated technology depreciation for the four quarters ended November 2, 2024 and the wind-down of our Canadian operations for the four quarters ended October 28, 2023. See the Adjusted EBIT and Adjusted EBITDA section, as well as our 2023 Annual Report, for detailed information on certain non-operating related adjustments.
3 Adjusted estimated income tax expense is calculated by multiplying the adjusted net operating profit by the adjusted effective tax rate (which removes the impact of non-operating related adjustments) for the trailing twelve-month periods ended November 2, 2024 and October 28, 2023. The adjusted effective tax rate is calculated by dividing adjusted income tax expense by adjusted earnings before income taxes for the same trailing twelve-month periods.
4 For leases with property incentives that exceed the ROU assets, we reclassify the amount from assets to other current liabilities and other liabilities on the Condensed Consolidated Balance Sheets. The current and noncurrent amounts are used to reduce average total assets above, as this better reflects how we manage our business.
NORDSTROM, INC.
ADJUSTED DEBT TO EBITDAR (NON-GAAP FINANCIAL MEASURE)
(unaudited; dollars in millions)
Adjusted debt to earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) is one of our key financial metrics and we believe that our debt levels are best analyzed using this measure, as it provides a reflection of our creditworthiness, which could impact our credit ratings and borrowing costs. This metric is calculated in accordance with our Revolver covenant and is a key component in assessing whether our revolving credit facility is secured or unsecured, as well as our ability to make dividend payments and share repurchases.
Adjusted debt to EBITDAR is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, debt to net earnings, net earnings, debt or other GAAP financial measures. Our method of calculating a non-GAAP financial measure may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted debt to EBITDAR is debt to net earnings. The following shows the components to reconcile the debt to net earnings calculation to Adjusted debt to EBITDAR:
| November 2, 2024 | |||||
| Debt | $2,617 | ||||
| Operating lease liabilities | 1,694 | ||||
| Adjusted debt | $4,311 | ||||
| Four Quarters Ended November 2, 2024 | |||||
| Net earnings | $263 | ||||
| Income tax expense | 99 | ||||
| Interest expense, net | 105 | ||||
| Earnings before interest and income taxes | 467 | ||||
| Depreciation and amortization expenses | 607 | ||||
Operating lease cost1 | 292 | ||||
Amortization of developer reimbursements2 | 62 | ||||
Other Revolver covenant adjustments3 | 138 | ||||
| Adjusted EBITDAR | $1,566 | ||||
| Debt to Net Earnings | 10.0 | ||||
| Adjusted debt to EBITDAR | 2.8 | ||||
1 Operating lease cost is fixed rent expense, including fixed common area maintenance expense, net of developer reimbursement amortization.
2 Amortization of developer reimbursements is a non-cash reduction of operating lease cost and is therefore added back to operating lease cost for purposes of our Revolver covenant calculation.
3 Other adjusting items to reconcile net earnings to Adjusted EBITDAR as defined by our Revolver covenant include interest income, certain non-cash charges and other gains and losses where relevant. For the four quarters ended November 2, 2024, other Revolver covenant adjustments primarily included supply chain impairment charges, interest income and accelerated technology depreciation. See the Adjusted EBIT and Adjusted EBITDA section, as well as our 2023 Annual Report, for detailed information on certain non-operating related adjustments.
NORDSTROM, INC.
FREE CASH FLOW (NON-GAAP FINANCIAL MEASURE)
(unaudited; amounts in millions)
Free Cash Flow is one of our key liquidity measures and, when used in conjunction with GAAP measures, we believe it provides investors with a meaningful analysis of our ability to generate cash from our business.
Free Cash Flow is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, operating cash flows or other financial measures prepared in accordance with GAAP. Our method of calculating a non-GAAP financial measure may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Free Cash Flow is net cash provided by operating activities. The following is a reconciliation of net cash provided by operating activities to Free Cash Flow:
| Nine Months Ended | ||||||||
| November 2, 2024 | October 28, 2023 | |||||||
| Net cash provided by operating activities | $371 | $107 | ||||||
| Capital expenditures | (321) | (375) | ||||||
| Change in cash book overdrafts | 28 | 37 | ||||||
| Free Cash Flow | $78 | ($231) | ||||||
INVESTOR CONTACT: | James Duies | |||||||
| Nordstrom, Inc. | ||||||||
| InvRelations@Nordstrom.com | ||||||||
| MEDIA CONTACT: | Stephanie Corzett | |||||||
| Nordstrom, Inc. | ||||||||
| NordstromPR@Nordstrom.com | ||||||||
Exhibit 99.2
Q3 2024 NORDSTROM EARNINGS CALL — PREPARED REMARKS
JAMES DUIES | HEAD OF INVESTOR RELATIONS
Good afternoon and thank you for joining us.
Before we begin, I want to mention that we'll be referring to slides, which can be viewed in the Investor Relations section on Nordstrom.com. Our discussion may include forward-looking statements, so please refer to the slide with our safe harbor language.
Participating in today's call are Erik Nordstrom, chief executive officer; Pete Nordstrom, president; and Cathy Smith, chief financial officer, who will provide a business update and discuss the company's third quarter performance.
Please note that when discussing our results and outlook, we will be referring to them on an adjusted basis for EBIT, EBIT Margin, and Earnings Per Share. Reconciliations to the most directly comparable GAAP measures can be found in our Q3 2024 Earnings Press Release, which is available on our website.
As we begin, I want to acknowledge the company’s prior announcements regarding the Board of Directors’ exploration of potential avenues to enhance shareholder value, the formation of a special committee to evaluate any proposal that might be presented by members of the Nordstrom family to take the Company private, and the receipt of such a proposal on September 3rd. We will not be commenting on this topic or speaking to this matter during our call today.
I'll now turn the call over to Erik.
ERIK NORDSTROM | CHIEF EXECUTIVE OFFICER
Thank you, Jamie, and good afternoon, everyone. Thanks for joining us today. I’ll start with our third quarter performance, then discuss the progress that we have made against our three priorities, and finish with some comments on the current retail environment.
In the third quarter, our efforts to enhance the customer experience continued to resonate, enabling growth in net and comparable sales, margin expansion, and an increase in our customer base. We delivered solid results with net sales reaching over $3.3 billion along with earnings per share of 33 cents. Both Nordstrom and Nordstrom Rack delivered 4 percent comparable sales growth. We’re particularly encouraged that our online business sustained its momentum, with digital sales growth of over 6 percent. Customers responded to newness in our selection of the brands that matter most to them, driving positive total company net sales growth for the fourth consecutive quarter.
Moving on to our three priorities for the year of driving Nordstrom banner growth, operational optimization, and building on the momentum at the Rack…
Driving Nordstrom banner growth is a key part of our strategy, and we continued to make progress during the third quarter. A curated selection of merchandise with greater depth in our customers’ favorite brands across our fleet, and not just in our largest stores, helped drive the results.
As an omnichannel retailer, we have to be prepared to serve customers when, where, and how they want to shop, and service is always our number one priority. Our customers define what good service is, not us, and our teams are very focused on taking care of each and every customer who shops with us. We take this commitment to serving our customers seriously, from the initial greeting, to providing assistance and a point of view at the fitting room, to completing the sale. For our customers that prefer to shop online, we aim to make the experience seamless and engaging through technology.
At Nordstrom.com, net sales growth in the third quarter was supported by enhancements to the search and discovery functionality on our site and in our app, as well as improvements in our assortment, especially of items under $100 in price. We continued to scale our Marketplace business in the third quarter, which now has over 300 sellers offering a wide selection to our customers. We look forward to continuing to grow this business in 2025 and beyond.
Another key priority for this year is operational optimization. Given the progress our supply chain team has made on reducing operating expenses, they have expanded their focus to increasing speed, by quickly getting orders to our customers’ doorsteps and moving product efficiently through our network to provide relevance and freshness. We know our customers desire speed, which can improve the customer experience as well as our financial outcome. For example, faster fulfillment and delivery of items drove an over 40 percent improvement in the speed of customer returns in the third quarter. Returns that come in faster mean that we can process, inspect, and get the items back into our inventory in a sellable condition in less time, increasing the product’s overall full price exposure.
Throughout the year, the supply chain team’s efforts have also supported our new Rack store openings successfully. More recently, they have positioned us well heading into holiday in terms of inventory flow, staffing, and shipping capacity.
We also continued to advance our priority to build on the momentum at the Rack during the third quarter. Our strategy of offering great brands at great prices continues to give customers a reason to choose Nordstrom Rack. In the third quarter, customers responded positively to our offering, driving net sales growth higher for the fourth consecutive quarter.
We also opened 12 new stores during Q3, bringing the full-year total to 23, which is consistent with our plans to open 20 to 25 new Racks per year. New Rack stores continue to be a great investment for us as they deliver a solid return on capital while attracting new customers.
NordstromRack.com remains a differentiator in off-price retail, enabling customers to shop when and how they want. Rack digital sales growth in the third quarter was driven by an expanded online merchandise offering, as well as focused efforts to maintain high in-stock rates in our fastest selling items.
Towards the end of the quarter, we launched store fulfillment for Rack digital orders in over 100 of our Rack stores around the country. Our efforts to improve the integrity of our inventory are enabling us to work towards optimizing that part of our store operations, prior to expanding to our entire fleet of Rack stores. We’re also excited to have launched buy online pick-up in store at those same 100-plus Rack stores for the first time ever in the third quarter. This allows NordstromRack.com shoppers to purchase select items online and pick them up same day in their nearest Rack location. We’re pleased with the early results of
these new services and are excited about the opportunity to better serve our customers, drive sales, and expand margins.
Looking ahead, the fourth quarter is a significant one for us, and provides us with the important opportunity to serve our customers. Across the company, our teams are focused on executing an exceptional holiday shopping experience with gifts for everyone at every budget, an enhanced digital experience, convenient services, and festive events, both in stores and online.
While we are excited about and well-prepared for the holiday season, there was a noticeable decline in sales trends towards the end of October.
As you’ll hear from Cathy in a moment, we are updating our full-year guidance, which takes the slowdown into consideration.
In advance of this holiday season, I want to thank our teams across the company for their hard work and taking care of our customers during this busy time. We’re excited about the season and wish everyone a happy holiday.
I’ll now turn it over to Pete.
PETE NORDSTROM | PRESIDENT
Thank you, Erik, and good afternoon, everyone.
My remarks today will focus on merchandise performance, our inventory position, and some highlights of what we have planned for holiday.
We know that our customers have a lot of choices when it comes to shopping, which is why we offer a selection of their favorite brands as well as new and emerging ones, enabling the discovery of new looks and styles. In stores,
merchandising is all about curating an assortment of our best brands that appeals to our customers. This year, we’ve edited out some brands in order to amplify the best ones, to create focus and a point of view in our stores. In our digital business, we aim to serve more customers on more occasions with more choices. We’re encouraged that our teams are executing well on both of these merchandising strategies.
From a total company perspective, the top performing categories in the third quarter were Women’s Apparel, Active, Shoes, and Men’s Apparel.
I’ll first cover our merchandise performance at each of our banners.
In our Nordstrom banner, we’ve been focused on building selection and depth in our customers’ favorite brands across all stores, particularly in Women’s Apparel this year. In the third quarter, leading brands such as Vince and Veronica Beard helped drive mid-teens growth in this category.
Active, which includes apparel and shoes, continued its impressive run as a top category at our Nordstrom banner. Relevant brand offerings drove low-teens growth, led by some of our customers’ favorites such as On Running, Hoka, and Vuori.
The Shoes category is an important one for us, given our company’s history, and it performed well in the third quarter. One of the contributors to the growth was our Make Room for Shoes campaign, which highlights certain of our customers’ favorite brands with new and unique inventory each month. The third quarter strength in Women’s Shoes was fueled by notable sales increases from brands including Stuart Weitzman, Veronica Beard, and Vince.
Men’s Apparel, another important category for us, rounds out our top performers in the third quarter. Similar to our efforts in Women’s, we have focused on providing more consistent assortments and increased selection across our fleet of stores. In the third quarter, Men’s Apparel growth was driven by dresswear and contemporary styles.
At the Rack, our strategy of offering great brands at great prices resonated with customers in the third quarter, driving double-digit topline growth. From a merchandise perspective, in Women’s Apparel, premium denim and dresses were strong performers in the third quarter. The Active category sustained its double-digit growth driven by Active shoes. In Men’s Apparel, sportswear drove the largest volume gain. And, rounding out the top categories in Q3 is Shoes, which was led by casual sneakers.
I’d like to also make some comments about our Nordstrom private brands, which are available at both banners. We continue to be pleased with the customer response and performance. In the third quarter, Nordstrom, Zella, and Open Edit were strong performers, helping to drive the double-digit growth in sales of our private brands as customers recognize the quality, style, and value of our offering.
Moving on to our inventory position at the end of Q3, which grew 6 percent year-over-year versus 5 percent in sales. Inventory growth in the third quarter was partially driven by some seasonal categories such as boots, sweaters, and outerwear that were slower in some parts of the country.
At the Nordstrom banner, our inventory is highly penetrated with our best brands and consists of lower clearance and aged inventory versus a year ago. At the Rack, inventories are higher than last year, yet also over-indexed to the best performing brands. Driving the growth is the inventory needed to ramp up our new Rack
stores as well as an increased selection available on NordstromRack.com, where we’ve added over 30,000 customer choices to the site. While our inventory growth in the third quarter was slightly higher than we’d prefer, we continue to feel good about the content of our inventory.
Turning to a few of the highlights of what we have planned for holiday, we’re excited about the season and the opportunities that lie ahead for us in the fourth quarter. This year, we’re making our customers’ holiday shopping easy and fun, prioritizing a well-rounded assortment across both banners that blends relevance and inspiration at all price points. We recently launched our 2024 holiday catalog with items focused on gifting and holiday dressing. In Apparel, sweaters are a key gifting item, and our teams have curated a great selection. In Beauty, the teams have been focused on making Nordstrom the destination to shop for luxury fragrances this holiday season, building on momentum in this area.
At the Rack, we’re invested across categories and price points to offer customers a relevant selection of great brands at great prices. As Erik mentioned, we’re making it easier to shop with the addition of buy online, pick-up in store in over 100 of our Rack locations. We’re also introducing Rush the Rack, an exclusive new app feature for Nordy Club members, notifying them about the newest in-store merchandise arrivals, so they can be the first to shop.
We’re hosting experiences and events to celebrate the holiday, from virtual events with fashion experts, to festive in-store experiences across the country like letters to Santa, Holiday Glam Up Days, the one-day-only Beauty Bash, and more. At our New York City flagship store, our special holiday activation includes hosting daily Santa Snow Shows, offering a holiday weekend brunch series, and starting tomorrow, we’re unveiling The Blizz on 57th Street, which will feature larger-than-
life, talking inflatable characters throughout the store. We’re excited to be providing customers with fun and engaging experiences this holiday season.
Before I turn it over to Cathy, I’d like to echo Erik’s comments thanking our teams for the hard work that they do in providing service to our customers all year, as well as wishing them, and all of you, happy holidays.
We’ll now go to Cathy for an update on our financial results.
CATHY SMITH | CHIEF FINANCIAL OFFICER
Thanks, Pete.
And thank you all for joining us. I’ll begin by covering our third quarter results, then discuss our outlook, and close with our capital allocation priorities.
In the third quarter, we again delivered solid results, with growth in net sales and EBIT as well as margin expansion.
Total company net sales increased 4.6 percent in the third quarter, driven by positive results at both banners. The timing shift of the Anniversary Sale, with one day falling in the third quarter this year versus eight days last year, had a negative impact on net sales of approximately 100 basis points.
Comparable sales increased 4.0 percent with positive comps in both banners, and particular strength in digital channels.
GMV increased 5.3 percent in the third quarter.
Nordstrom banner net sales increased 1.3 percent, while comparable sales grew 4.0 percent. The difference is mainly due to the use of a realigned calendar for comparable sales, which eliminates the approximately 200 basis point negative impact from the timing of the Anniversary Sale, which is reflected in net sales.
Nordstrom Rack net sales increased 10.6 percent, with comparable sales increasing 3.9 percent.
Digital sales grew 6.4 percent in Q3, representing the sixth consecutive quarter of sequential improvement. The timing shift of the Anniversary Sale had a negative impact on digital sales of approximately 100 basis points. Digital sales represented 34 percent of total sales during the quarter.
Gross profit, as a percentage of net sales, expanded 60 basis points to 35.6 percent, primarily on strong regular price sales.
Ending inventory increased 5.9 percent versus a year ago. As Pete noted, the quality of our inventory is good, although the level is slightly higher than we want.
Selling, general and administrative expenses, as a percentage of net sales, of 36.6 percent increased 25 basis points compared with 36.3 percent in the year-ago quarter. This was primarily due to higher labor costs and a charge related to accelerated technology depreciation that were partially offset by leverage on higher sales and improvements in variable costs across the business. SG&A expenses, after excluding the $14 million in accelerated technology depreciation, decreased to 36.2 percent.
Our EBIT margin expanded 45 basis points to 2.9 percent, driven by a more than 25 percent year-over-year increase in EBIT dollars in the third quarter.
Income tax expense of $11 million, or 18.9 percent of pretax earnings, was higher than the 14.2 percent recorded in the year-ago quarter. Last year’s income tax benefited from the wind-down of our Canadian operations.
Third quarter EPS of 33 cents is favorable to last year’s 25 cents, largely driven by leverage on higher sales as well as the expansion of our gross margin.
We ended the third quarter with $1.2 billion in available liquidity, including just under $400 million in cash. Our balance sheet and financial position remain solid.
Before moving to our outlook, I’d like to offer some additional commentary on our third quarter results and the current environment.
Our efforts to improve the customer experience are taking hold, as evidenced by the strength of our topline. In the third quarter, we again grew our customer count, reported an increase in customer trips, and expanded our margins.
Our credit card revenues as a percentage of total revenue declined modestly versus Q3 of last year, continuing the trend that we’ve experienced all year. The decline was driven by higher losses, partially offset by higher balances within the portfolio. This was consistent with our expectations.
Turning to the current environment and our outlook for the year. While we continue to be pleased with our year-to-date results, the external environment remains uncertain. As Erik mentioned earlier, we did experience softness in sales that started around the end of October. We also have a shorter holiday season by 5 days this year, and as a reminder, the 53rd week benefited fourth quarter net sales by 460 basis points last year. When considering the puts and takes, and appreciating that we typically realize about 30 percent of the full year’s net sales and approximately 40 percent of our annual EBIT in the fourth quarter, we believe
it is prudent to remain appropriately cautious with our outlook. As such, we are updating and modestly increasing our outlook for Revenue and Comparable Sales for the year.
Our updated guidance includes:
Full-year revenue in the range of flat to an increase of 1 percent, which includes a headwind of approximately 135 basis points from the 53rd week in 2023’s results.
We now expect total company comparable sales growth of 1 to 2 percent in 2024, versus 52 weeks in 2023. As our fiscal 2023 included a 53rd week, we calculate our 2024 comparable sales growth using a realigned, 52-week 2023 period for comparability.
Turning to profitability, we continue to expect a full-year EBIT margin in the range of 3.6 to 4.0 percent.
We continue to expect our effective tax rate to be approximately 27 percent for the full year.
From an earnings per share perspective, we expect full-year results in the range of $1.75 to $2.05, excluding the impact of any share repurchases.
As a reminder, we continue to expect charges approximating 10 basis points to our reported SG&A expense as a percentage of net sales in the fourth quarter, related to the accelerated technology depreciation we mentioned.
Our capital allocation priorities remain unchanged; we’ll invest in the business to better serve our customers with high-return projects, reduce our leverage, and return cash to shareholders.
Last week, our board of directors declared a quarterly cash dividend of $0.19 per share.
In closing, we are encouraged that our focus areas and priorities are resonating with customers, driving topline strength and expanding margins. I would also like to echo Erik and Pete’s comments thanking the teams across the organization for their commitment and dedication to serving our customers, as well as wishing everyone a happy holiday season.
We thank you for your interest in Nordstrom.