Nordstrom on Thursday reported that second quarter total company net sales rose 7.1% year over year as comparable sales rose 4%. Comp sales at full-line Nordstrom stores rose 4.1%, driven by kids apparel and beauty, and off-price comps rose 4% on improved inventory, according to a company press release.
Q2 net earnings were $162 million, up 47% from the year-ago period. Gross profit as a percentage of net sales expanded 91 basis points from the year-ago quarter to 35%, partly due to the timing of an anniversary sale but also thanks to regular price-selling trends and leverage on occupancy expenses, the company said.
The department store raised its outlook for the year and now says that full-year net sales will reach $15.4 billion to $15.5 billion, up from $15.2 to $15.4 billion, and that comp sales will rise 1.5% to 2%, up from its previous expectation for a 0.5% to 1.5% rise.
Nordstrom's investments in new retail concepts, like its merchandise-free Local stores, and its supply chain and merchandising, paid off, executives said on Thursday. The strong numbers follow a first quarter performance that fell short of analysts' expectations.
Particularly in its Rack stores, which suffered last quarter thanks to an inferior offering, the department store benefited from merchandise improvements. And its partnerships with appealing goods from third-party labels helped boost sales of full-price items in the flagship, executives said. "In the second quarter, sales from strategic brands grew 13%, making up around 45% of our full-price business," co-president Blake Nordstrom told analysts, according to a transcript from Seeking Alpha.
The success of one of those strategic brands, Anthropologie Home, is leading executives to consider sales of more furniture and home goods, a segment that Nordstrom, which has always been more an apparel and footwear retailer than other traditional department stores, hasn't much offered.
Sales from Nordstrom Rewards customers, which have reached 10 million and have grown 20%, represented 58% percent of Q2 sales, compared with 56% a year ago, executives also said.
The company is holding its own in margins, despite increases in e-commerce sales, which are particularly up at the company's flagship website. "Online traffic relative to our results is up, and that's where you're seeing a lot of the growth. So most of our comp increase is coming from more transactions," co-president James Nordstrom said on the call.
The merchandise mix has gone far to boost sales and protect margins, according to GlobalData Retail Managing Director Neil Saunders. "Indeed, as other department stores suffer from the withdrawal of premium brands, Nordstrom has actively developed proprietary labels and partnerships," he said. "This has allowed the company to stand out in a sea of sameness and has given customers a reason to visit."
But Nordstrom has also, "for a long time, invested in its retail proposition," he also said. "This means that it has far fewer legacy issues, such as a long tail of shabby stores in need of investment. In turn, this ensures that gains in sales fall quickly through to the bottom line."
Nordstrom's results stood in stark contrast to Macy's, whose second quarter faltered compared to its first.