Nordstrom Management Discusses Q2 2012 Results - Earnings Call Transcript

Nordstrom (JWN)

Q2 2012 Earnings Call

August 09, 2012 4:45 pm ET


Robert E. Campbell - Vice President of Investor Relations and Treasurer

Blake W. Nordstrom - Principal Executive Officer, President and Director

Michael G. Koppel - Chief Financial Officer and Executive Vice President

Erik B. Nordstrom - Executive Vice President, President of Stores and Director

Peter E. Nordstrom - Executive Vice President, President of Merchandising and Director


Deborah L. Weinswig - Citigroup Inc, Research Division

Dorothy S. Lakner - Caris & Company, Inc., Research Division

Charles X. Grom - Deutsche Bank AG, Research Division

Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division

Jennifer Black - Black & Company Inc., Research Division

Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division

Adrianne Shapira - Goldman Sachs Group Inc., Research Division

Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division

Barbara Wyckoff - Credit Agricole Securities (USA) Inc., Research Division

Kimberly C. Greenberger - Morgan Stanley, Research Division

Paul Swinand - Morningstar Inc., Research Division

Lizabeth Dunn - Macquarie Research

Alex J. Fuhrman - Piper Jaffray Companies, Research Division

Dana Lauren Telsey - Telsey Advisory Group LLC



Hello, and welcome to the Nordstrom 2012 Second Quarter Conference Call. At the request of Nordstrom, today's conference call is being recorded. [Operator Instructions] I will now introduce Rob Campbell, Treasurer and Vice President of Investor Relations for Nordstrom. You may begin, sir.

Robert E. Campbell

Hello, everyone, and thank you for joining us for the Nordstrom conference call, which will last 45 minutes and include 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-K and 10-Q.

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 second quarter performance and outlook for fiscal 2012. During the Q&A session, we will be joined by Pete Nordstrom, President of Merchandising; and Erik Nordstrom, President of Stores.

Before we begin, I wanted to mention that Blake and Mike will be using slides that can be viewed in the Investor Relations section of our website. If you're listening to this conference call as a webcast, you should already see the title slide. If you're listening by telephone, you can view the slides by going to

With that, I'll turn the call over to Blake.

Blake W. Nordstrom

Hello, everyone. I'm happy to provide an overview of our company's progress as we reached the halfway point of 2012. There's a lot of momentum in our company with multiple initiatives driving substantial top line growth and full-line Rack and our Direct business.

We just completed our Anniversary Sale and once again we were thrilled by the customer response with high volumes of traffic both in-store and online and sales through July that were above our expectation. The overarching theme in our company continues to be about improving the customer experience across all channels. It is reflected in our top line results and in the increasing number of growth opportunities that are emerging.

I'd like to take a few moments to review our progress along these lines in the second quarter. There are several slides we've made available on our website in the Investor Relations section as a supplement to our comments. The first slide highlight some of our recent growth initiatives.

We are excited to announce in June our plans to open a full-line store in New York City. In one sense, it's the culmination of efforts for over a decade defined what we believe is an outstanding location for our flagship store in the world's premier city for retailing. In another sense, it's a beginning as we go through the process of preparing for what we hope will be the highest volume store in our company and an opportunity to further elevate and extend our brand. We look forward to its opening, which we anticipate will occur in 2018.

The Rack continues to execute well, increasing its market share while achieving high sales productivity, EBIT margins and return on invested capital. Recognizing its growth potential several years ago, we embarked on a more ambitious store expansion plan for the Rack. Over the last 4 years, the number of Racks has more than doubled to 110 today. Based on what we've experienced during this period and how our customers responded, we see an opportunity for even greater acceleration in its growth. We will continue with our plan to open a total of 15 Racks this year, and then increase to 24 openings in 2013. Its' likely that we'll have doubled our size again by 2016 with over 230 Rack stores. We are encouraged by the performance we've seen in this business and by the ongoing growth opportunity it represents to serve more customers.

Our Direct business followed its 44% sales increase in the first quarter with a 40% increase in the second quarter. It largely reflects the meaningful investments we're making to improve the customer experience in e-commerce, expanding selection, improving the site experience, expediting the checkout and delivery process and ultimately making it easier for our customers to shop. This year for the first time, our Fashion Rewards customers had the chance to shop online during the 9-day early access period prior to the start of the event. And with the launch of the Nordstrom iPad app, coming later this month, we are excited to introduce some novel features that we think customers will appreciate.

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