Yahoo Finance Nordstrom Beat Sales Estimates in 1Q15
Nordstrom Beats Sales Estimates but Delivers Mixed Results in 1Q15
Nordstrom’s online and off-price channels fuel 1Q15 sales
Nordstrom (JWN) reported its results for the first quarter of fiscal 2015 after the close of financial markets on May 14. The company’s net sales for 1Q15, which ended May 2, 2015, increased by 9.7% to $3.22 billion from the comparable quarter of the previous year. The company’s 1Q15 sales were ahead of analysts’ sales expectations of $3.17 billion.
Driving factors
Nordstrom has exceeded analysts’ estimates in the last three quarters. Nordstrom’s 1Q15 sales were driven by strong growth in online businesses and off-price Rack stores. Full-line store sales grew by 0.9%. Sales at the company’s Rack stores grew by 12.0% with the addition of ten new stores in the first quarter. Nordstrom’s off-price stores have been experiencing strong growth rates compared to the company’s high-end, full-line stores. Consumers remain cautious about their spending on discretionary items and prefer to buy discounted merchandise. The SPDR S&P 500 ETF (SPY) invests ~12.3% of its portfolio holdings in the consumer discretionary sector.
Growth in online businesses
Sales on Nordstrom.com increased by 19.7% to $480 million and Nordstromrack.com and HauteLook increased by 50.0% to $117 million. Online sales benefited from the expanded merchandise selection. The company has been investing in technology to enhance the consumer shopping experience. Online sales were also driven by faster delivery speed, helped by the company’s fulfillment centers as well as the option to buy online and pick up in store. Recent initiatives to attract more consumers include the curbside pickup option for online purchases. The company plans to test this option at select stores. Under this program, consumers can opt for calling or texting to collect their purchase as they near the store.
Online sales accounted for ~19.2% of the company’s net sales in 1Q15 compared to 16.9% in 1Q14. The company plans to spend ~35.0% of its planned capital expenditure of $4.3 billion over the next five years on technology and fulfillment centers.
Nordstrom’s peers in the department stores industry—like Macy’s (M) and J.C. Penney (JCP)—are also focusing on growing their online businesses. J.C. Penney recently announced its decision to sell its beauty brand, Sephora’s, products online.
Nordstrom makes up ~0.5% of the Consumer Discretionary Select Sector SPDR Fund (XLY). Though Nordstrom exceeded analysts’ sales estimates in 1Q15, it missed analysts’ earnings estimates. We’ll discuss this miss in the next article of this series.
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