Nordstrom Q4 beats Street; dives deeper into Rack, launching digital marketplace

Nordstrom reported a better-than-expected fourth quarter, helped by rising sales at its off-price Nordstrom Rack banner, called “the growth engine” of the company.

Although the upscale department store beat sales expectations, it warned of a potential revenue decline in its current fiscal year, which has one less sales week. 

Nordstrom plans to open 22 Rack stores in its current fiscal year (locations at end of article), up from 19 last year. 

“Rack stores continue to be a growth engine for our company as they are our largest source of new customer acquisition, accounting for over 40%,” said CEO Erik Nordstrom on the earnings call. “Growing our store count also supports long-term customer retention.”

He added that roughly a quarter of retained Rack customers migrate to the Nordstrom banner within four years.

Along with Rack, digital remains a key priority for Nordstrom. The retailer will launch a digital marketplace on its website in April. 

“By reimagining the way we work with our brand partners, we'll grow our curated online assortment to serve more customers on even more occasions through increasing our use of unowned inventory,” Erik Nordstrom told analysts on the call. "Marketplace will allow customers to shop more products and sizes from their favorite brands while providing them more access to new and emerging brands.”

Separately, the company announced the launch of an ongoing series of pop-ups at its New York City flagship. Called The Corner, the dedicated, 2000-sq.-ft. space , on the corner of 57^th Street and Broadway, debuted with luxury brand Bode. The Bode shop will be open through April 7.

Nordstrom reported net income of $134 million, or $0.82 per share for the quarter ended Feb. 3. Adjusted earnings came to $0.96 a share., topping analysts’ estimates of $0.88 per share.

Sales inched up 2.2% to $4.42 billion, ahead of estimates of $4.38 billion. The retailer said the wind down of its Canadian business caused net sales to drop more than 3%.

By division, net sales rose 14.6% at Nordstrom Rack, but fell 3% at full-price stores.

“We delivered on our 2023 guidance and are confident in our expectations for continued sales improvement and sustained profitability in 2024,"  Erik Nordstrom stated in the earnings release. "We're laser-focused on efforts we know will drive growth and profitability across the business over the next few years, including new Rack store openings, Nordstrom digital growth and increasing comp store sales?

In the fourth quarter, active, beauty and women's apparel had the strongest growth versus 2022. For the full year year, active and beauty had the strongest growth versus 2022.

"Across both banners, we improved our merchandise assortment by effectively managing our inventory levels and investing in the products and brands we know our customers respond to," said Pete Nordstrom, president of Nordstrom. "This year, we'll build on that progress in merchandising and other green shoots across our business as we focus our efforts on our refreshed 2024 priorities."

For the year ahead, Nordstrom expects full-year same-store sales within a range of a 1% decline to a 2% gain. Overall revenue is expected to range somewhere between a 2% decline and a 1% gain.

Nordstrom ended its fiscal year with a total of 359 stores, including 258 Rack stores, 93 full-price stores, two Last Chance clearance outlets and six Nordstrom Local locations.

The company has announced plans to open the following stores: