Consumers were drawn to both of the retailer’s main store formats, while members of Nordstrom's loyalty program made up a larger percentage of sales.

(Bloomberg)—Nordstrom Inc. sidestepped this week’s department-store carnage, with the retailer making strides in attracting shoppers for both full-priced and discounted merchandise.

A 23% gain in e-commerce sales also fueled Nordstrom’s results. The Seattle-based chain, No. 16 in the Internet Retailer 2018 Top 500, reported same-store sales that rose 4% in the latest quarter, exceeding analyst expectations. Consumers were drawn to both of the company’s main store formats—full-price and off-price—while members of their loyalty program made up a larger percentage of sales.

The better-than-expected results mark a welcome change for a domestic department-store sector that’s faced a tough week. While Macy Inc.’s (No. 6) raised its earnings and revenue guidance for the year on Wednesday, a spike in spending spooked investors. The pain continued Thursday as J.C. Penney Co.’s (No. 31) surprise prediction for an annual loss drove its stock down 27%, prompting one analyst to call the shares “worthless.”

Nordstrom clearly broke the mold. The company has been ramping up sales at its discount-focused Rack chain in an effort to avoid having to put items at its full-price stores on sale.

Overcoming the retail apocalypse

Nordstrom’s approach to overcoming the so-called “retail apocalypse”—consumers’ shift away from traditional bricks-and-mortar stores—has been more experimental than its rivals. The chain now has an inventory-free store, and it also opened a store for men’s goods in Manhattan in April, where customers can purchase items online and pick them at any time—even if the store is closed. A women’s location will follow across the street in the fall of 2019.

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Thursday’s report builds on what has been a good year for Nordstrom investors. In March, after failing to agree on a buyout price, Nordstrom’s board and the Nordstrom family ended talks about taking the company private.

The chain raised its full-year earnings outlook to between $3.50 and $3.65 a share from its prior outlook of $3.35 to $3.55. The percentage gain in same-store sales, a key measure that focuses on established locations, topped the 1.1% estimate by Consensus Metrix.

Nordstrom also reported that gross profit margin, a percentage of revenue minus a range of expenses, widened to 35%. That’s 91 basis points higher than a year earlier.

The retailer did, however, attribute a percentage point of the 7.1% revenue gain in the period to an anniversary sale. The impact from the sale “is expected to fully reverse in the third quarter,” the company said in a statement.

 

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