Nordstrom (ticker: JWN) has reported better-than-expected adjusted earnings of 25 cents per share for the fiscal third quarter, surpassing consensus estimates of 12 cents per share (according to FactSet). However, revenue experienced a decline as shoppers scaled back their spending.
Declining Revenue
Revenue for the quarter ending in October fell by 6.4% year over year, totaling $3.3 billion, slightly below the projected $3.4 billion.
Sales at Nordstrom's department stores dropped by 9.4% compared to the previous year. On the other hand, Nordstrom Rack, the company's off-price segment, saw a slightly smaller decline with sales down by 1.8%.
Focus on Improving Margins and Earnings
Despite the challenges faced, Nordstrom CEO Erik Nordstrom expressed satisfaction with the progress made in the third quarter, particularly highlighting improvements in gross margin and earnings. Nordstrom emphasized the importance of remaining agile and customer-focused amidst ongoing uncertainty and a softening consumer spending environment.
Gross profit margins increased by 1.8 percentage points to 35% year over year. The boost can be attributed to lower markdowns and a favorable inventory position. Notably, inventory levels in the third quarter were 8.8% lower than the same period last year.
Reaffirming Outlook and Narrowed Earnings Guidance
Nordstrom has reaffirmed its outlook for fiscal 2023 while narrowing its earnings-per-share range. They anticipate a decline in revenue between 4% and 6% for the full year. Furthermore, adjusted earnings per share are projected to range between $1.90 and $2.10, compared to the previously stated range of $1.80 to $2.20.
Market Response
Following the earnings announcement, shares of Nordstrom rose by 0.6% to $15 in after-hours trading. However, the stock has experienced an 8% decline so far this year.
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