Nordstrom(US:JWN)2022-11-22 23:02Financial Data and Key Metrics Changes - For Q3 2022, the company reported net sales of $3.4 billion, a decrease of 3% year-over-year, with a loss per share of $0.13 and adjusted earnings per share of $0.20 [6][44] - Gross profit as a percentage of net sales decreased by 190 basis points, primarily due to higher markdown rates on clearance products [46] - Ending inventory increased by 1% compared to a 3% decrease in sales, indicating a focus on aligning inventory with demand [47] Business Line Data and Key Metrics Changes - Nordstrom banner sales and gross merchandise value (GMV) each decreased by 3% year-over-year, with Nordstrom Rack sales declining by 2% [12][45] - Digital sales decreased by 16%, impacted by the anniversary sale timing shift and changes in store fulfillment strategies [22][46] - Sales of the top 100 brands at Nordstrom Rack increased by 9%, highlighting growth opportunities in premium brands [17] Market Data and Key Metrics Changes - Customer demand softened in late October and early November, particularly in lower-income segments, but improved in the last two weeks of the quarter [9][55] - Order pickup represented 12% of nordstrom.com demand, an increase of 200 basis points year-over-year, indicating a shift towards in-store shopping [19] Company Strategy and Development Direction - The company is focused on improving Nordstrom Rack performance, increasing profitability, and optimizing supply chain and inventory flow [14] - Strategic initiatives include reducing store-based order fulfillment for Rack and increasing the minimum order amount for free shipping to improve profitability [15] - The company aims to clear excess inventory and enhance the product mix to better serve customers and drive profitable growth [40] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic pressures affecting all customer segments, particularly lower-income groups, but expressed confidence in the company's agility and strategic capabilities [25][63] - The company expects to enter 2023 with a healthy inventory position and is committed to disciplined inventory management [47][63] - For fiscal year 2022, the company reaffirms revenue growth expectations of 5% to 7% and an adjusted EBIT margin of approximately 4.3% to 4.7% [57] Other Important Information - Anne Bramman, the Chief Financial Officer, will step down on December 2, 2022, with Michael Maher serving as interim CFO [42] - The company has extended its credit card program agreement with TD Bank, enhancing the card member experience [51] Q&A Session Summary Question: What are the positive offsets to maintain the sales guide despite headwinds? - Management acknowledged the headwinds but indicated that the impacts are consistent with what was observed in Q3, expecting similar trends in Q4 [68] Question: How is the company planning full-line inventory by category for next year? - Management expressed confidence in the inventory content for the fourth quarter, focusing on categories that reflect customer engagement and occasion-based shopping [71] Question: What factors contributed to the underperformance of Nordstrom Rack? - Management noted a pullback in lower-income customer segments and emphasized the need to clear less productive inventory while focusing on premium brands [84][86] Question: Are the variable cost improvements permanent? - Management confirmed that the improvements in variable costs are permanent, driven by supply chain efficiencies [94] Question: How much excess inventory is left to clear in Q4? - Management indicated that they expect to take approximately $200 million of incremental markdowns in the back half of the year, aiming for a healthy inventory position by year-end [96] Question: What are the expectations for operating margin and SG&A growth in 2023? - Management highlighted the uncertainty in the macro environment but emphasized a focus on preserving agility and managing expenses while improving gross margin [105]