Nordstrom’s Already Bad Year Gets Worse
Date: Friday, August 28, 2020
Source: The Wall Street Journal
Nordstrom experienced another steep revenue drop last quarter, but managed to salvage its bottom line
Nordstrom was all about accentuating the bottom line Tuesday, after some unflattering top-line results.
The department-store retailer’s net revenue declined by 53% from a year earlier in the quarter ended Aug. 1, worse than the 39% drop analysts had estimated and the 40% drop in the first quarter. Online sales also fell 5% year-over-year.
Nordstrom offered a couple of reasons for the disappointing top line: One was its anniversary sale, which was pushed back to August from July, shifting some revenue—especially digital revenue—to the next quarter. The company figures that the shift reduced sales last quarter by 10 percentage points. The other was inventory, which the company kept lean to prevent markdowns and to start the anniversary sale with a fresh slate of merchandise. The reduced supply left some demand unmet, according to the company. Still, the drop looks markedly worse compared with the 23% revenue drop Kohl’s saw last quarter.
Instead of dwelling on the disappointing figure, Nordstrom drew more attention during its earnings call late Tuesday to the ways it was able to salvage the bottom line. Its net loss was smaller than expected, partly because of lower-than-expected operating costs, which declined 30% year-over-year. Operating cash flow also increased by $187 million last quarter compared with the previous year.
Taking a step back, it isn’t hard to understand why Nordstrom would be struggling: Covid-19 has shifted fashion trends away from work, dressy and event items—three categories Nordstrom has historically been known for—as UBS equity analyst Jay Sole noted in a report. Nordstrom said its top-selling categories last quarter included home, accessories, beauty and activewear. These aren’t the types of products Nordstrom is known for, but the company said it is shifting inventory to respond to consumer demand.
That was probably a necessary lesson for Nordstrom, which historically may have held some sway over customers’ taste, showing them what was “in” and what wasn’t. These days, it’s clear the consumer holds that power.