This summary is based on the second quarter fiscal 2008 earnings call conducted by Nordstrom Inc. (JWN: chart) on August 14, 2008.
Management:
President, Director: Blake W. Nordstrom
CFO and EVP: Michael G. Koppel
EVP and President Merchandising, Director: Peter E. Nordstrom
EVP and President Stores, Director: Erik B. Nordstrom
Director, IR: Chris Holloway
Key Investor Issues:
- The second quarter total sales dipped 4.3% to $2.29 billion from the year ago quarter.
- Quarterly EPS decreased from 71 cents to 65 cents.
- The company repurchased 1.5 million common shares for a total value of $50 million.
Second-Quarter Financial Highlights:
The ended quarter is the second largest of the year for the company.
- Three of the company’s five annual sales events were held during the quarter.
- The Q2 EPS eased by 8.5% mainly due to lower sales and higher levels of discounts.
The quarterly same-store sales decreased 6%.
- This was within the company’s planned 5% to 7% same-store sales decline.
- The results in full-line stores continued to be challenging with same-store sales down 9% during the quarter.
- Nordstrom Rack continued its multi-year run of strong sales growth with same-store sales increasing 6.3% in the quarter.
- The sales for Nordstrom Direct were also strong, increasing 14.6% in the quarter.
[The gross profit, as a percentage of sales, decreased 168 basis points compared with last year’s second quarter.
- Inventories were reportedly in line with plans.
- The management reported a challenging operating environment amidst intense promotional activity.
- The quarter-end inventory per square foot was down 12.8% from the prior year.
- An estimated 3% of the decline was due to the company’s sale of Faconnable in Q3 of 2007.
The quarterly finance charges and other income increased $4 million, with growth in receivables offsetting lower interest rates.
- The receivables at the end of the quarter were 13% higher than Q2 of 2007.
- This was due to the continued success of the fashion rewards program, which drove a higher penetration of card usage in stores and increased spending on Nordstrom Visa cards.
- The quarterly delinquency rate was 2.5%, consistent with first quarter rates.
- However, this represents an increase of 53 basis points from Q2 last year.
- The write-offs increased 38 basis points versus the first quarter to 4.3%. This represents an increase of 134 basis points versus the year ago quarter.
The net interest expense of $34 million was $17 million higher than last year.
- This was due to changes in the capital structure made in the fourth quarter of last year.
- The company finished the quarter with an adjusted debt-to-EBITDA ratio of 1.9 times.
- This is consistent with the capital structure goal of 2 times.
- Cash flow from operations remained strong in the quarter at $218 million.
The SG&A expenses decreased 5% or $32 million compared with last year’s Q2.
- The company continues to execute against the revised expense plan shared in Q1.
- The decrease in expense from last year was driven by the continued focus on controlling expenses and reduced incentives tied to company performance.
