Nordstrom(US:JWN)2022-03-02 02:43Financial Data and Key Metrics Changes - In Q4 2021, net sales increased by 23% compared to Q4 2020 but decreased by 1% compared to Q4 2019. Total revenue for the year was up 38%, aligning with guidance [49][50][52] - The EBIT margin for Q4 was 6.8%, an improvement of 10 basis points, while the annual EBIT margin was 3.4%, towards the high end of guidance [54][60] - Gross profit as a percentage of net sales increased by 340 basis points due to improved promotional effectiveness and fewer markdowns [52] Business Line Data and Key Metrics Changes - Nordstrom Rack sales declined by 5% in Q4, but this represented a sequential improvement of 320 basis points over Q3 [51] - Digital sales grew by 23% in Q4 compared to Q4 2019, with mobile users accounting for approximately 70% of total digital traffic [26][51] - Luxury categories, including Designer and Fine Jewelry, posted strong double-digit growth over 2019, while pandemic-related categories like Home and Active saw sales increases of 52% and 22%, respectively [31][32] Market Data and Key Metrics Changes - The Southern U.S. stores outperformed Northern U.S. stores by approximately 7 percentage points, with suburban locations outperforming urban locations by 10 percentage points [17][76] - The company noted significant geographic performance disparities, with urban areas still recovering from pandemic impacts [17][76] Company Strategy and Development Direction - The company is focused on improving Nordstrom Rack performance, increasing profitability, and optimizing supply chain and inventory flow [7][27] - Strategic initiatives include enhancing omnichannel capabilities, expanding the Nordstrom Media Network, and increasing brand partnerships [42][44] - The company aims to achieve financial targets set during the 2021 Investor Event while building capabilities for profitable market share growth [28][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about consumer spending in 2022, driven by wage growth and higher employment levels, while acknowledging potential inflationary headwinds [55][56] - The company is prepared for potential pandemic-related disruptions but sees encouraging signs of a return to normal activities [56][57] - Management is confident in the strategic plans and business outlook for 2022, expecting revenue growth of 5% to 7% [59][64] Other Important Information - The company plans to invest in business capabilities, reduce leverage, and resume cash returns to shareholders, including a potential quarterly dividend [61][63] - Ending inventory increased by 19%, with plans to reduce the sales-to-inventory spread by half by the end of Q1 2022 [52][39] Q&A Session Summary Question: Guidance and Acceleration in 2022 - Management indicated that guidance for 2022 is based on improved performance at Nordstrom Rack and steady growth at Nordstrom, leveraging market strategy and merchandising advancements [72][73] Question: Digital Footprint and Advertising Services - Management noted that the Nordstrom Media Services platform is expected to grow, leveraging digital traffic to monetize site visits [81][83] Question: Rack Division Pricing Architecture - Management discussed the opportunity to balance pricing strategies without compromising existing customer value, emphasizing ongoing improvements in the Rack business [87][89] Question: EBIT Margin Guidance - Management explained that EBIT margin improvements will come from topline growth and expense leverage, with expectations for steady growth in both Nordstrom and Rack divisions [122][123] Question: SG&A Dollar Growth Expectations - Management provided context on SG&A growth, focusing on efficiencies in merchandise margins and supply chain productivity to offset inflationary pressures [124]