Third-quarter net earnings at Nordstrom dropped to $53mn from $126mn in the year-ago period, though Nordstrom cited sequential improvement in sales and earnings from this year’s second quarter. The net profit for the third quarter ended Oct. 31 included an income tax benefit of $19mn associated with the Cares Act. Earnings before interest and taxes came to $106mn, a decrease from $193mn during the same period in fiscal 2019, primarily due to lower sales volume, partially offset by realized expense savings. Through the health crisis, Nordstrom remains focused on its three priorities for growth. First, building its market strategy, which CEO Erik Nordstrom characterized as ‘the company blueprint’. The strategy links store and digital assets to provide greater services, faster deliveries, more pickup options, and greater merchandise choices in key metropolitan areas. In October, Nordstrom rolled out its market strategy to five additional markets, scaling to 10 of its top markets, which account for more than half of sales. In these markets, customers have access to up to seven times more merchandise selection with two-day delivery or next-day pickup. In addition, customers can now pick up nordstrom.com, nordstromrack.com and HauteLook.com orders at all Nordstrom and Nordstrom Rack stores in the U.S.

The second priority is ‘fuelling growth of Nordstrom Rack’, which represents one third of Nordstrom Inc.’s total business. Last year Rack brought in 7mn new customers, a third of which cross shopped to Nordstrom full-line department stores, leading to a higher overall customer spend. Eighty percent of the top 200 brands are also carried at the Rack. The third priority is to increase the velocity of digital sales. Digital sales of $1.6bn represented 54% of total sales and increased 37% last quarter. Nordstrom is a majority digital business right now and it is profitable as shown by their third quarter results. Excluding the Anniversary Sale shift, digital sales increased in the mid-teens in the third quarter, consistent with trends in the first half of the year.

Total company sales decreased 16% to $3bn last quarter, from $3.56bn in the year-ago period. The sales results included an approximate 10-point positive impact from the Anniversary Sale event, which shifted from the second quarter in 2019 to the third quarter this year. Top-performing merchandise categories included active, home, beauty and designer. In Nordstrom’s full-price department store business, net sales decreased 7%. Excluding the Anniversary Sale shift, sales decreased in the mid-20s percent range. In the Nordstrom Rack off-price business, net sales decreased 32% compared with the same period in fiscal 2019. Gross profit as a percentage of net sales of 32.8% decreased 150 basis points from the same period in fiscal 2019 primarily due to the shift of the Anniversary Sale in addition to deleverage from lower sales volume. Merchandise margins exceeded company expectations and reflected significant improvement relative to the prior quarter, strong sellthroughs and greater regular priced selling. For the fourth quarter, Nordstrom projects a sales decline in the low 20% range. In other results, third-quarter operating cash flow of $155mn exceeded expectations, enabling Nordstrom to pay down an additional $300mn on its revolving line of credit. Nordstrom ended the quarter with $1.5bn in liquidity including about $900mn in cash.