Nordstrom Inc., impacted by the pandemic-related charges and sales declines across all selling channels, reported a net loss of $255 million in the second quarter ended Aug. 1, compared to net earnings of $141 million during the same period last year.
Losses before interest and taxes came to $370 million, which included pretax charges of $23 million related to COVID-19. In the year-ago period, Nordstrom reported earnings before interest and taxes of $216 million.
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Charges last quarter consisted primarily of asset impairments from store closures, premium pay and benefits, and restructurings, which were slightly offset by credits from the Coronavirus Aid, Relief and Economic Security Act. In the second quarter of 2020, these charges reduced net earnings by $14 million or $0.08 per diluted share, and consisted primarily of corporate asset impairments.
Revenues came to just over $1.86 billion in the last quarter, compared to $3.87 billion in the year-ago quarter.
While the numbers were down and not surprising due to the pandemic and the retailer’s assortment of “non-essentials,” officials said cash flow and earnings exceeded expectations and were attained through improved merchandise margins and significant overhead cost reductions. Back in May, the company revealed 16 department stores and the three Jeffrey designer specialty stores would be permanently closed. The company also recently consolidated its merchandising organization, further reducing the headcount, and has reduced inventory levels.
Net sales decreased 53 percent from last year, reflecting temporary store closures for about 50 percent of days during the quarter due to COVID-19 as well as the shift of the Anniversary Sale, Nordstrom’s biggest event of the year, from the second quarter to the third.
“At the onset of the pandemic, we focused on protecting and enhancing liquidity, and we successfully executed on these plans,” said Erik Nordstrom, chief executive officer of Nordstrom Inc. “Thanks to our team’s efforts during the second quarter, we further strengthened our balance sheet with liquidity of $1.3 billion and generated operating cash flow of more than $185 million. We are now pivoting to prioritize market share gains and profitable growth as we advance our strategies.”
During the first quarter, Nordstrom significantly reduced inventory by more than 25 percent to mitigate markdowns on seasonal inventory and bring in newness for customers. As a result, merchandise margin trends in the second quarter improved sequentially and exceeded expectations. While officials said sales results met their expectations, they were constrained by the flow of inventory which improved as the quarter progressed. In July, Nordstrom increased inventory receipts to meet customer demand, particularly for its Anniversary Sale, which offers early access to new fall designer goods at temporarily reduced prices first to Nordy Club customers and later all customers. Nordstrom said the Anniversary Sales is tracking in-line with expectations, reflecting improvement in underlying trends relative to July.
Second-quarter operating cash flow of more than $185 million exceeded company expectations and enabled Nordstrom to pay down $300 million on its revolving line of credit. Nordstrom ended the second quarter with $1.3 billion in total liquidity including $1 billion in cash.
“We’re confident that we can improve sales trends in the second half of the year and beyond,” said Pete Nordstrom, president and chief brand officer. “Our inventories are current and in-line, and we’re focused on amplifying relevant categories, brands and trends to meet customers’ changing preferences.”
At the full-price department stores, net sales decreased 58 percent. Excluding the Anniversary Sale event shift impact, full-price sales decreased in the mid-forties percent range.
Off-price net sales decreased 43 percent compared with the same period in fiscal 2019.
Top-performing merchandise categories included home, kids’ wear, accessories, beauty and active in both full-price and off-price.
Total company digital sales decreased 5 percent. Excluding the Anniversary Sale event shift impact, digital sales increased about 20 percent in the second quarter and in the mid-teens range on a year-to-date basis. There was “significant growth” in new Nordstrom customers shopping digitally of more than 50 percent.