Earnings before interest and taxes were $30 million, or 0.8 percent of net sales, compared with $299 million, or 6.7 percent of net sales for the same period in fiscal 2019.
Net sales for the last quarter, which ended on Jan. 30, declined 20 percent to $3.55 billion, which the company said improved sequentially by 600 basis points relative to the third quarter, after adjusting for a shift of the Nordstrom Anniversary Sale. In the year-ago fourth quarter, Nordstrom generated $4.44 billion in sales.
“We’re pleased with top-line growth improvement, but not with bottom-line results,” Erik Nordstrom, chief executive officer, said during a conference call on Tuesday, following the release of the fourth-quarter figures.
While Nordstrom said the timing of a recovery of customer demand remains “uncertain,” the company is projecting that fiscal 2021 revenue, including retail sales and credit card revenues, would grow more than 25 percent, with digital representing about 50 percent of sales. EBIT margin is expected to be about 3 percent of sales. The forecast assumes stores remain open during the year.
For all of last year, Nordstrom had a net loss of $690 million, versus reporting a profit of $496 million in 2019. The first quarter of 2020, with the onset of the pandemic, took the biggest toll on profitability.
In the call, Erik Nordstrom, along with Anne Bramman, chief financial officer, outlined the headwinds impacting the fourth quarter, citing inventory delays leading to excess levels later in the season, increased markdowns and lower-than-expected merchandise margins; higher supply chain shipping costs, and higher labor and fulfillment costs associated with COVID-19. Heading into the holidays, the company increased its receipt plans. They said the company is taking actions to significantly reduce inventory levels in first quarter 2021 when Rack is seen reaching its desired level, and that the company will be “fully repositioned” in the second quarter, when the full-line Nordstrom department stores are seen reaching their desired level.
“The toughest category just broadly is apparel, particularly men’s apparel,” said Nordstrom. “We have a sizable work and more formal assortment. That’s also true in women’s. Fashion apparel is the most perishable. It’s something of concern to us. We are being super conservative on what we are investing in there.”
Still, the quarter was not without bright spots. Nordstrom generated fourth-quarter operating cash flow of $88 million, representing the third consecutive quarter of positive cash flow; velocity on digital sales increased, and the active, designer handbags and designer apparel, home, beauty and kids’ categories performed well.
He also said, “We’re super enthusiastic with Asos,” which purchased the Topman, Miss Selfridge and other brands from the bankrupt Arcadia in the U.K. last month. Nordstrom has been selling Topshop merchandise exclusively for several years. “Asos is capable of investing and elevating the brand,” said Pete Nordstrom.
Some other retailers, mostly those selling “nonessentials,” have reported fourth-quarter declines, including Macy’s Inc., which saw fourth-quarter net income fall to $160 million, or 51 cents a diluted share, from $340 million, or $1.09, in the year-ago period, as comparable sales declined 17.1 percent. Abercrombie & Fitch, however, practically broke even to last year with its fourth-quarter earnings.
At Nordstrom, “We’re proud of our team’s efforts to generate another quarter of improved sales trends and positive operating cash flow in what remains an uncertain environment. Heading into 2021, we’re taking steps to improve our inventory position,” said Erik Nordstrom, in his statement Tuesday on the results.
“Over the quarter, we successfully scaled capabilities across both of our powerful brands — Nordstrom and Nordstrom Rack,” the CEO added. “As we execute our long-term growth strategy to get closer to our customers than ever before, we’re confident in our ability to unlock the full potential of our digital-first platform to gain market share and drive profitable growth.”
Digital represented 54 percent of total sales in the fourth quarter, compared with 35 percent for the same period last year. Enabled by Nordstrom’s market strategy to expand merchandise selection by four times on average with faster delivery, the upscale retailer’s top 10 markets “continued to outperform the company average by 200 basis points.”
Nordstrom’s long-term strategy, called “Closer to You,” calls for the retailer to broaden its digital assortment from 300,000 items to potentially 1.5 million over the next three to five years; inject lower price offerings into the Nordstrom Rack off-price matrix, and extend the reach of its three-year-old market strategy, from 10 urban areas currently to 20 this year.
Pre-COVID-19, Nordstrom started gradually building its home assortment, primarily across sheets, towels, decor and cookware. An aggressive strategy for the company’s relatively small home business is being drawn up. With activewear, the company is well into building up the assortment.