Nordstrom reported Q3 net earnings of $64 million, compared to $53 million during the year-ago period, though it is still behind its 2019 sales and profit levels. The earnings were brought down due to higher labor costs and challenges at the Rack off-price division, while the Nordstrom banner - the full-line store and digital businesses - showed increases. EBIT came to $127 million in the third quarter ended Oct. 31, compared with $106 million during the same period a year ago primarily due to higher sales volume and improved merchandise margins, partially offset by labour cost pressure. EBIT was $66 million lower than Q3/20219 due to fulfilment and labour cost pressures, partially offset by benefits from resetting the cost structure in 2020. Last quarter also included a $19 million tax benefit associated with the CARES Act. Q3 net sales increased 18 % versus the same period in fiscal 2020 but decreased 1 % versus the same period in fiscal 2019. During the quarter, Nordstrom banner net sales increased 3% versus the third quarter of fiscal 2019, which included an approximately 3% positive impact from Anniversary Sale timing.
Net sales for Nordstrom Rack last quarter decreased 8% versus the third quarter of fiscal 2019. Sales in the home, active, designer and beauty categories had the strongest growth compared with the third quarter of 2019. More specifically, designer shoes, designer handbags and men’s designer apparel did well, as did sunglasses and swimwear suggesting that the travel industry is getting better.
Geographically, Nordstrom comparable store sales in the Southern regions, including Southern California, grew 8% versus 2019 and outperformed the Northern regions. Comparable sales in suburban stores continued to be stronger than urban stores in the third quarter, with both improving sequentially over the second quarter. New strategies at Rack to improve performance, outlined by Erik and Pete Nordstrom included:
. Increasing ‘pack and hold’ merchandise two to three times to offset future supply chain disruptions.
. Reversing an over-dependence on lower priced goods in certain categories bringing average AUR (average unit retail) down and putting pressure on operations.
. Strengthening selections of ‘coveted’ brands offered at ‘premium values.’
. Strengthening Rack brand awareness through the ‘More Reasons to Rack’ marketing campaign launched in September.
Nordstrom continues to expand customer choice counts as part of its evolving merchandising strategy. Alternative partnership models beyond traditional wholesale arrangements grew to nearly 8 % as a share of total sales, and the Nordstrom’s recently unveiled partnerships with Fanatics and Asos will provide a broader assortment in new and existing categories for customers, without a corresponding increase in owned inventory for the company. For fiscal 2021, the company projects revenue, including retail sales and credit card revenues, to grow more than 35 % versus fiscal 2020; EBIT margin is expected to be about 3 to 3.5 % of sales. Digital sales decreased 12 % compared with the same period in fiscal 2020, during which the Anniversary Sale temporarily shifted to the third quarter of that year, and increased 20 % compared with the same period in fiscal 2019. Digital sales represented 40 % of total sales during the quarter.