Nordstrom swings to big loss; has ‘sufficient liquidity’ to weather COVID-19

Nordstrom reported a $521 million loss and a 40% drop in sales as its stores closed during the pandemic. But the retailer sounded a confident note, saying its financial position will allow it to successfully get through the current crisis.

“We successfully strengthened our financial flexibility by increasing liquidity, lowering inventory by more than 25 percent from last year and significantly reducing our cash burn by more than 40 percent from March into April," said Erik Nordstrom, CEO of Nordstrom. "We're entering the second quarter in a position of strength, adding to our confidence that we have sufficient liquidity to successfully execute our strategy in 2020 and over the longer term."

To date, the retailer has reopened about 40% of its department stores, with its full store base expected to be open by the end of June.

Nordstrom swung to a loss of $521 million, or $3.33 per share, for the quarter ended May 2, from net income of $37 million, or 23 cents per share, in the year-ago period. 

Revenue fell 40% to $2.12 billion from $3.44 billion a year ago. Excluding its credit card revenue, net sales were $2.02 billion.

Sales at full-price Nordstrom department stores were down 36% and sales at the off-price Nordstrom Rack division were down 45%. Total company digital sales were up 5%, reaching $1.1 billion. 
 
Nordstrom said that its off-price and e-commerce businesses accounted for nearly 60% of its sales in 2019.

“As we anticipate an acceleration of these longer-term customer trends, we're taking proactive steps to move faster in executing our strategic plans,” said Pete Nordstrom, president and chief brand officer, Nordstrom. 

In comments, analyst Neil Saunders said that overall, Nordstrom has a much stronger proposition than rivals department stores. But there is a lot more work to be done in terms of improving assortments and doing more with own-brands in order to make Nordstrom — as well as its off-price Rack division — more distinct and interesting compared to competitors.

“Overall, Nordstrom emerges from the pandemic in a reasonable position,” said Saunders, managing director, GlobalData Retail. “It has far more going for it than its peers, but the recovery will be slow, and it needs to work hard to capitalize on and press home its advantages.” For more analysis, click here.