Nordstrom, Inc. (JWN)
Q3 2010 Earnings Call Transcript
November 15, 2010 4:30 pm ET
Rob Campbell – Treasurer and VP, IR
Blake Nordstrom – President
Mike Koppel – EVP and CFO
Pete Nordstrom – EVP and President, Merchandising
Ed Yruma – KeyBanc
Jennifer Black – Jennifer Black & Associates
Deborah Weinswig – Citi
Lorraine Hutchinson – Bank of America/Merrill Lynch
Adrianne Shapira – Goldman Sachs
Liz Dunn – FBR
Bob Drbul – Barclays Capital
Neely Tamminga – Piper Jaffray
Wayne Hood – BMO Capital
Michael Exstein – Credit Suisse
Richard Jaffe – Stifel
David Glick – Buckingham Research
Ken Stumphauzer – Sterne Agee
Charles Grom – JP Morgan
Dana Telsey – Telsey Advisory Group
Hello and welcome to the Nordstrom 2010 third quarter conference call. At the request of Nordstrom, today’s conference is being recorded. All lines will be on a listen-only mode until the question-and-answer session. (Operator instructions) I will now introduce Rob Campbell, Treasurer and Vice President of Investor Relations for Nordstrom. You may begin, sir.
Good afternoon, everyone, and thank you for joining us. Today's earnings call will last approximately 45 minutes and will include about 30 minutes for your questions. As a reminder, all forward-looking statements on this call are subject to risks and uncertainties that could cause the company's actual results to differ materially from the expectations and assumptions discussed due to a variety of factors that affect the company, including the risks specified in the company's most recently filed forms 10-Q and 10-K.
Participating in today's call are Blake Nordstrom, President of Nordstrom, Inc., and Mike Koppel, Executive Vice President and Chief Financial Officer, who will discuss the company's third quarter 2010 performance and outlook for 2010. Joining us for the Q&A are Pete Nordstrom, President of Merchandising, and Erik Nordstrom, President of Stores.
And now, I will turn the call over to Blake.
Thank you, Rob. On behalf of our team here, we are pleased to report on our results. We had a very solid third quarter, and our performance is a continuation of our improving trend over roughly the past two years. October marked our 13th consecutive month of total company comp-store gains.
We now are approaching or exceeding some of our best performances on a number of key metrics, including inventory turn, gross profit, and regular price selling. This is a real testament to our merchandising teams and their ability to execute during challenging times. Additionally, our customers continued to respond favorably to our ongoing pursuit of a more seamless shopping experience. These efforts are giving the customer the ability to shop with us on their terms regardless of channel.
I did want to take a moment to emphasize our inventory management. During our August conference call, I pointed out that we were slightly over and have some pockets within merchandising divisions that we felt needed addressing. Our general merchandise managers and their teams responded immediately and worked through this in a thoughtful and measured way. As a result of their efforts, here we are one quarter later back in our desired position of sales growth exceeding inventory growth.
We are encouraged by how our rigor and focus on inventory management gives us the flexibility to respond to the customer appropriately. Our customers are highly receptive to newness and fashion in spite of the soft economic climate. We will continue to maintain and pursue this strategy of improving turns, which allows us to flow a new compelling product for our customers.
During the third quarter, our Rack division opened nine new stores. Each of these stores opened strong, and we’ve been receiving considerably positive feedback from customers in those communities. Just this last week, opened our 17th and final Rack for 2010 in Peoria, Arizona, bringing us to 86 Racks. These are highly productive stores and deliver sales per square foot that are more than double that of our competitor’s average.
Additionally, the return on this investment is one of the best we have as a company. As investors, you should know that we are confident about the gains we are making with market share and new customers overall through the Rack. We recognize that for the third quarter, we had a 2.2% comp-store decrease in Iraq.
There are a number of things we are working on to address this. But the overall picture of the Rack is a positive one. While we are seeing some sales transfer with our new stores, they are helping us achieve more total sales. Comp-store sales performance is an important metric, but we view the Rack in a large context and we like our prospects here. We believe in Rack store growth and expect to open 16 to 18 additional Rack stores in 2011.
We are encouraged by our performance overall and outlook for the balance of this year and as we enter 2011. We think we are in a strong position given the relationship we have with our customers, our people, our financial strength, our capabilities within IT, our supply chain, and the teams consistent demonstrate of strong disciplines across the inventory and expense management.
We recognize we have opportunities to further grow the business. We want you to know that we are looking at growth in a broader strength, given our strengths and our commitment to be a customer-centric organization. We have many doors open to us, and we will keep you apprised of our progress as we have updates to share. We’ve proven that if we stay focused on our customer strategy and our ongoing efforts to improve service, we can earn more of our customers’ business and gain market share.