Nordstrom to Strengthen Financial Position Amid Coronavirus
The outbreak of the novel coronavirus has messed up the global economy, significantly affecting the retail space. Companies have been shutting stores, limiting store hours and withdrawing their guidance. Nordstrom, Inc. JWN, which was no exception to this has, however, announced plans to strengthen its financial position amid a challenging economic landscape.
After announcing store closures and guidance withdrawal last week, the company unveiled a host of precautionary actions to enhance its financial flexibility and stay firm. To this end, it is suspending its quarterly cash dividend, starting the second quarter of fiscal 2020. The company is also suspending share buybacks. Nonetheless, Nordstrom, which ended fiscal 2019 with a healthy financial status, remains committed to long-term dividend payments.
Further, the company is drawing $800 million from its revolving credit facility. Apart from this, it targets a reduction in operating expenses, capital expenditures and working capital to the tune of roughly $500 million, which will be incremental to its initial savings goal of $200-$250 million for fiscal 2020.
As mentioned above, Nordstrom announced store closures for its Nordstrom full-line, Nordstrom Rack, Trunk Club clubhouses and Jeffrey stores for two weeks, on Mar 17. Simultaneously, the company had also taken back its fiscal 2020 guidance due to the growing spread of COVID-19. The coronavirus, which originated in China, has spread enormously. Sadly, the pandemic has infected more than 300,000 people worldwide and the death toll has crossed 14,000.
Apart from Nordstrom, many other retailers like Abercrombie & Fitch ANF, Gap GPS, Kohl’s KSS and Guess?, to name a few, have closed stores temporarily to contain the spread. Nordstrom, in its Mar 17 release, said that it will continue to operate online through apps and sites — Nordstrom.com, Nordstromrack.com, HauteLook.com and TrunkClub.com.
Markedly, Nordstrom generated about one-third of its 2019 sales from the online business. The company has been focused on advancing in the technology space by boosting e-commerce and digital networks and improving supply-chain channels and marketing efforts. Digital sales advanced 9% in fourth-quarter fiscal 2019. This represents 35% of the company’s business, up 200 basis points (bps) year over year. This Zacks Rank #3 (Hold) company benefited from online order pickup, which contributed more than half of digital sales growth in full-price stores. Such upsides along with initiatives to strengthen financial position amid such a crisis bode well.
Shares of Nordstrom have collapsed almost 62% so far this year compared with the industry’s decline of 52.7%.
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