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Nordstrom Reports Fourth Quarter And Fiscal Year 2012 Earnings

Nordstrom, Inc. (NYSE: JWN) today reported a 26 percent increase in earnings per diluted share of $1.40 for the fourth quarter ended February 2, 2013 compared to $1.11 per diluted share for the same quarter last year. Net sales in the fourth quarter were $3.6 billion, an increase of 13.5 percent compared with net sales of $3.2 billion during the same period in fiscal 2011. Net earnings of $284 million increased 20 percent compared with net earnings of $236 million for the same quarter last year.

In fiscal year 2012, the Company achieved record sales and earnings while making significant investments to improve the customer experience in store and online. For the third consecutive year, the Company achieved double-digit growth in annual net sales and earnings per diluted share and same-store sales increases in the high single-digit range.

Similar to many other retailers, Nordstrom follows the retail 4-5-4 reporting calendar, which included an extra week in the fourth quarter of fiscal 2012 (the 53rd week). In the 53rd week, the Company had net sales of approximately $162 million, representing an approximate $0.04 increase to earnings per diluted share for both the quarter and fiscal year. The 53rd week is not included in same-store sales calculations.

FOURTH QUARTER SUMMARY

Nordstrom’s fourth quarter performance was consistent with the strong trends the Company experienced throughout the year.

  • Total Company same-store sales increased 6.3 percent compared with the same period in fiscal 2011. Nordstrom same-store sales, which consist of the full-line and Direct businesses, increased 6.1 percent. Top-performing merchandise categories included Men’s Apparel, Cosmetics, Kids’ Apparel, and Women’s Apparel.
  • Full-line same-store sales increased 2.2 percent compared with the same period in fiscal 2011. The South and Midwest regions were the top-performing geographic areas relative to the fourth quarter of 2011.
  • Direct sales surpassed $1 billion dollars this year for the first time in its history, driven by a same-store sales increase of 31 percent in the fourth quarter on top of last year’s increase of 35 percent for the same period. Direct sales growth continues to outpace the overall Company, reflecting ongoing initiatives to improve the customer experience online.
  • Nordstrom Rack, which opened fifteen stores in fiscal 2012, continued to demonstrate strong sales growth in the fourth quarter with an increase in net sales of 23 percent. Same-store sales increased 7.1 percent for the Rack, which is its largest fourth quarter increase in the last six years.
  • Gross profit, as a percentage of net sales, was flat compared with the same period in fiscal 2011. Markdown improvements were offset by higher expenses associated with our enhanced Fashion Rewards program, which generated incremental sales and attracted new members.
  • Retail selling, general and administrative expenses, as a percentage of net sales, decreased 45 basis points compared with the same period in fiscal 2011. The decrease was primarily attributable to leverage on increased sales, partially offset by increases in fulfillment costs associated with improving the speed of delivery for shipped sales.
  • In the Credit segment, overall performance continued to improve with delinquency and write-off rates well below prior-year levels. Given this performance and the underlying economic trends, the reserve for bad debt was reduced by $10 million.
  • Earnings before interest and taxes of $498 million increased 20 percent compared to $417 million for the same quarter last year. Earnings before interest and taxes as a percent of net sales was 13.9 percent compared with 13.1 percent for the same quarter last year.
  • During the quarter, the Company repurchased 4.2 million of its shares for $219 million. A total of $393 million remains under its existing share repurchase board authorization. The actual number and timing of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission rules.

FULL YEAR RESULTS

  • Nordstrom achieved record net sales of $11.8 billion, which represented an increase of 12.1 percent compared with prior year net sales of $10.5 billion. Full year same-store sales increased 7.3 percent, on top of last year’s same-store sales increase of 7.2 percent.
  • Earnings per diluted share of $3.56 increased 13.4 percent compared to $3.14 for fiscal year 2011. Net earnings of $735 million increased 7.7 percent compared with net earnings of $683 million for fiscal year 2011.
  • Return on invested capital (ROIC) for the 12 months ended February 2, 2013 was 13.9 percent, which increased from 13.3 percent in the prior 12-month period due primarily to the growth in earnings. A reconciliation of this non-GAAP financial measure to the closest GAAP measure is included below.

CAPITAL INVESTMENT AND EXPANSION UPDATE

In fiscal 2013, the Company’s capital expenditures, net of property incentives, are expected to total between $750 and $790 million, compared with approximately $450 million in fiscal 2012. The majority of the increase is attributable to Rack and full-line store growth, improvements to e-commerce delivery and fulfillment, and the planned Manhattan store development.

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