Nordstrom beats holiday profit expectations; Sets plans to exit Canada

Investing.com -- Nordstrom Inc 's (NYSE: JWN) revenue and profit slowed in the fourth quarter from a year earlier but profit beat expectations as the retailer announced plans to wind down its operations in Canada.

The department store chain reported revenue of $4.2 billion and earnings per share of 74 cents. Analysts expected revenue of $4.35B and EPS of 67 cents.

Shares of Nordstrom are down 2% in pre-market Friday. They are up 19.7% so far this year.

CEO Erik Nordstrom said the company entered Canada in 2014 with plans to build a sustainable business. “Despite our best efforts, we do not see a realistic path to profitability for the Canadian business,” he added.

Seattle-based Nordstrom said it will report approximately $300 million to $350M of pre-tax charges related to the wind-down in the first quarter of fiscal 2023. It also said the wind-down is expected to result in an approximately $400M decline in total company net sales and a $35M improvement in total company earnings before interest and taxes in fiscal 2023, relative to fiscal 2022.

The company has six Nordstrom stores in Canada and seven Nordstrom Rack stores, and employs 2,500 people there.

Total fourth quarter company net sales fell 4.1% compared with the same period in fiscal 2021, though its flagship department store did better than its discount Rack operations. Nordstrom store net sales fell 2.4% while Nordstrom Rack net sales fell 8.1%.

For fiscal 2023, the company is forecasting revenue, including retail sales and credit card revenues, to fall 4% to 6% versus fiscal 2022, including an approximately 250 basis point negative impact from the wind-down of the Canadian operation.

It also forecast fiscal 2023 adjusted EPS, excluding the wind-down charges, of $1.80 to $2.20. Analysts were forecasting EPS of $1.98.

TD Cowen analyst Oliver Chen believes Nordstrom must show "faster inventory management."

"Outlook assumes 2H acceleration based on inventory improvements and Rack store openings, as well as easier comparisons. We're cautious on excess designer inventory at full line," the analyst said.

Goldman Sachs analyst Brooke Roach said the results and guidance were largely in line with consensus expectations following a holiday preannouncement issued in January.

"We remain guarded on fundamental reacceleration in the stock and the business until we gain greater visibility on Rack banner stabilization, and see a balanced risk/reward. Stay Neutral," Roach wrote in a client note.

By Liz Moyer and Senad Karaahmetovic

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