Luxury department store chain Nordstrom (NYSE:JWN) reported Q4 FY2023 results beating Wall Street analysts' expectations, with revenue up 2.3% year on year to $4.42 billion. It made a non-GAAP profit of $0.96 per share, improving from its profit of $0.74 per share in the same quarter last year.
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Nordstrom (JWN) Q4 FY2023 Highlights:
- Revenue: $4.42 billion vs analyst estimates of $4.38 billion (0.9% beat)
- EPS (non-GAAP): $0.96 vs analyst expectations of $0.89 (7.7% beat)
- Guidance for full year EPS (non-GAAP): $1.85 vs analyst expectations of $1.97 (6.1% miss)
- Free Cash Flow of $285 million, down 48.9% from the same quarter last year
- Gross Margin (GAAP): 36.3%, up from 35% in the same quarter last year
- Store Locations: 359 at quarter end, increasing by 1 over the last 12 months
- Market Capitalization: $3.34 billion
Known for its exceptional customer service that features a ‘no questions asked’ return policy, Nordstrom (NYSE:JWN) is a high-end department store chain.
Department StoreDepartment stores emerged in the 19th century to provide customers with a wide variety of merchandise under one roof, offering a convenient and luxurious shopping experience. They played an important role in the history of American retail and urbanization, and prior to department stores, retailers tended to sell narrow specialty and niche items. But what was once new is now old, and department stores are somewhat considered a relic of the past. They are being attacked from multiple angles–stagnant foot traffic at malls where they’ve served as anchors; more nimble off-price and fast-fashion retailers; and e-commerce-first competitors not burdened by large physical footprints.
Sales GrowthNordstrom is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.
As you can see below, the company's revenue has declined over the last four years, dropping 1.4% annually as its store count shrunk.
This quarter, Nordstrom grew its revenue by 2.3% year on year, and its $4.42 billion in revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.
Number of StoresA retailer's store count often determines on how much revenue it can generate.
When a retailer like Nordstrom keeps its store footprint steady, it usually means that demand is stable and it's focused on improving operational efficiency to increase profitability. At the end of this quarter, Nordstrom operated 359 total retail locations, in line with its store count 12 months ago.
Taking a step back, the company has kept its physical footprint more or less flat over the last two years while other consumer retail businesses have opted for growth. A flat store base means that revenue growth must come from increased e-commerce sales or higher foot traffic and sales per customer at existing stores.
Key Takeaways from Nordstrom's Q4 Results We were glad its revenue, gross margin, and adjusted EPS outperformed Wall Street's estimates. On the other hand, its full-year earnings forecast missed analysts' expectations. The weak outlook is likely the culprit driving down the stock price. Overall, the results could have been better. The company is down 10% on the results and currently trades at $18.8 per share.