Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Nordstrom Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions].

As a reminder this conference is being recorded.

I'll turn the call over to Sara Penner, Manager of Investor Relations for Nordstrom.

begin. now may You

Sara Penner

thank joining and you afternoon, us. for Good

to we'll be be we nordstrom.com. in begin, to that want I on section can Before referring mention slides, investor relations the viewed which

forward-looking discussion Safe our statements, Our language. include so refer slide Harbor to please with the may

Nordstrom, fourth taking call reminder, a performance. Pete questions business Maher, Officer, Executive matters. in company's today's and the on Erik Brand here and Nordstrom, we Officer, fourth discuss our and today update Officer, other and As performance, to will are and Chief Chief are quarter discuss interim a business who we Chief quarter President not be Participating provide will Michael Financial

the over I'll Erik. turn now And call to

Erik Nordstrom

joining Thank us today. you, good you Sara, and afternoon, everyone. for Thank

quarter, of earnings sales fourth the $X.X net delivered share per we and $X.XX. of billion For

back XXXX, from with increased the and in fiscal year adjusted at Looking year, line revenue was X.X%. last margin X% on EBIT

primarily pull both We Rack, banners saw Across profiles. pronounced to trend trend starting the season. and in customers late softening back lower was in through holiday income with this more Nordstrom continued the customers June, in

our to Given we took QX with the executing inventory clear mix. agility, excess environment and in starting uncertain action we optimize product are

sector. softening was now right a markdowns last excess levels implemented our we This this down to we inventory initially promotional more compounded XXXX our strategy healthier than year with in was XX% to position and and intensity inventory levels trend, XXXX, for we As the the result, our position are Well, goal. achieve had levels in by levels. from planned much better a with inventory in line

the were expected in result, lower our fourth margins As a than quarter.

driving than lower time, leverage At our with basis growth. initiatives to that sales XXX more lower even remain resulting pleased per points and more in supply we and pressures. the ongoing chain I'm costs same SG&A profitable of improvement in long-term this, rate QX, unit committed efficiency delivered Despite inflationary

looking our across to business the long operations term. our and are the with are mindset win and resources deploying this talent financial we are against clear we positioned medium where We and best in to ensure opportunities

are Canadian With been decided next Canadian grateful drove to Canada believed including over for operations best path this compelling core focus profitable. entered to it many Despite sustainable on not the with down we profitability. months efforts, few and the we our in mind, U.S. initiatives the our no our business impact built multiple over has business. The simplify a from increase to because business have wind in have to our our realistic we presented opportunity, outcomes, and our relationships our team's XXXX customer losses COVID we years. improve further We

and a total of more on we from and benefit focus Canada sales, we business. impact will the than on our related accounts profitability charges sharper less this our sales the X% on decision will our detail to onetime and provide U.S. going for forward. believe Michael

personal the decision, in make, recognize confident employees. it our one was difficult and on impact are to we a we our While

We are fairness employees our committed respect. with to Canadian and treating

establishing our deepest an passion the are appreciation have for employees talent We period. down additional benefits I will and during the Canada. that of for team wind employee the trust in provide great

provided to changing I the meet for prices, products, customers. styles the want breadth uniquely our of a positioned and of for believe unwavering two customer for interconnected we our growth. service over ever, of customers years. is our powerful have passion all, and foundation their dedication most and Nordstrom I sincerely than thank our brands, to service, With have durable More the the them needs they to

our It acquired X.X greatest starts XXXX Club clear million profitability. new members. customer base, new and improve in million taking our our asset. to market and approximately customers XXXX actions in We Nordy added share are expand XX loyal We with

these successes, continues as and building to to This be on even critical digitally evolve more to to our attracting legacy experience stores committed are while more We of delivering on omnichannel. physical customer service driving is the across engagement customers. and

In more to each customer depth continuing these increasing and performance. on three, we chain improving experience, are to priorities addition focused supply the will inventory drive go one, Nordstrom address performance in advance priorities. Rack Pete of of initiatives. I'll productivity; initiatives then three in better financial these our improving two, specific of support on to optimization XXXX. our some briefly, into our

year QX to in Sales by Rack. receive We spending. store-based costly little ship-to-store nordstromrack.com. and order driven the last was a specific actions free profitability, decrease that the on saw minimum Nordstrom consumers to took declined versus of we eliminating over namely Rack amount X% with as improve we Starting raising fulfillment order estimate pull back delivery half

negatively reduced operations growth and Rack. impacted actions top cancellations, Rack at line but These order the improved profitability, simplified

out open-to-buy unproductive cleared giving us and older also we assortment therefore, and our enter increased improve to flexibility XXXX. We greater as inventory merchandise

improving three bottom are Nordstrom line ways. both our at top committed and to performance We Rack in

great win are most brands Rack nationally when market with deliver recognized customers strategic we great and grow and prioritizing to Simply we share. drive sales prices. brands put, XXX know we at First help at importantly, us we the

and can the outsized believe of are give recognition Rack, brands these which we time increase performers these and We flow each By customer great at the engagement, space. of turns strong off-price visit inventory proven are newness increasing many available brands customers drives the us. widely not brand in they

accounting newly largest for convenience new our Rack XX acquisition, customer acquired than more stores continue XX% year. our expanding are new for source we opening Second, of to XXXX. in stores and of Rack this be customers customers by reach

customers we a have reach opportunity is as growth and Our model Rack fleet more more store our drive underpenetrated, stores. and profitable we through new to proven expand attract with an

we Third, and will higher greater nordstromrack.com. profitability drive engagement at

with off-price customers. the we unique to digital and see space, our opportunities increase Rack our are leverage capabilities in digital to Our engagement assets

to improved continue by operational orders. store-based model for we did also discontinuing will optimize fulfillment as the nordstromrack.com of profitability We

inventory productivity. across world's provides new brands. priority Better Moving with XXXX, to best the operation for and discipline now from relevant assortments our inventory our second customers

We largest also inventory, on improve merchandise opportunity have investment. productivity returns increased annual our our earnings from and our capital invested to significant a through

substantial outcomes, and and stock volatility over markdowns The receipt three on years flows, had disruptions in buy our inventory impact business and significant plans, levels, the turns. a management past our including

opportunity As of stabilized, to an to norms pre-pandemic inventory elements across we management. supply our chains return these have have

while to improvement great our third leverage turn supply SG&A XXXX despite made on chain We in optimization. lower provide and sales XXXX. greater will build momentum continued our pressure. will work from the let's Pete in on progress improve our inflationary Finally, our rate efficiency. customer chain we experience our of highlights priority which This further expense drove in driving to supply year, initiatives,

building Improvements been continuing West three The center, and our for and We're and are most the inventory unpredictable we productivity scale than chain network. to generation. across more omnichannel our Coast costs. years flow supply turns also continue in past challenging have our to a help reduce industry

are core true circumstances, proud the unprecedented people our values. navigated We way our of to while remaining incredibly the

ready to move forward. we enter are XXXX, As we

expect longer-term we near positioning We priorities term a growth. that for performance have while profitable set drive in will us of clear improved the

in made our core those difficult our to focus We business. have on increase decisions executing priorities against

flows, the the sheet have and we balance that, Pete. a and at With customer to of do. it everything cash remain healthy We I'll committed over putting center turn to strong we

Pete Nordstrom

Erik with from Erik, fourth Thanks, talk starting performance. discussed, like highlights quarter, about follow the then everyone. areas I'd performance the during and up under good of streams the afternoon, to each merchandise our focus with merchandise three work

We as we strength pleased do prioritize to men's were the impacted people saw in taking areas of particularly categories. by and updated healthy see special in quarter. additional in our markdowns XXXX was we said, getting looks. and so last in occasions dress apparel, the levels which year-end results shop return up most office for That at to inventory levels, and strength to versus year wear to

Beauty Clinique. than banner, our had less To a get sweaters offerings high with like position, Rack prior grew to as XX% ending illustrate expanded brands well efforts responded inventory strong cleaner sell-through year. single MAC outerwear, the including categories, digits with and and to At levels seasonal our inventory consumers to boots,

and customers productivity. At improve a After designer over the softened the our by models the half, our banner, and business back to our Nordstrom in with to they Nordstrom year, inspiration of our up We now reviewing last are and inventory needed banner. making to we XXXX, selection, at start XX% sales XX% the progress robust ways. relevance make where in unowned adjust alternative delivering through grew we're GMV to positions by on partnering inventory brands

versus which Network, Media Nordstrom our scale to grew last XX% year. continue over We

and TikTok ads offering to advertising offsite the we with adjacent on-site scaled fourth Nordstrom, display advertising with and quarter, our Pinterest launched nordstrom.com. partnerships to expanded In brands categories and on

the with look diversify connect Our our as opportunity loyal engaged ad brand their to advertisers value highly return with mix. strong particularly media customers a to spend, on partners and

Now on to our initiatives.

X mentioned, but inventory and is initiatives to improving And Rack the room known grow As and also across on space. loved to of are brands have turn performance. strategic sales the the Erik XXX U.S. faster focused drive we're prioritizing that in off-price well

banner. than include monthly better brands we carry of many productivity These in selling average Strategic brands brands other Nordstrom sell-through. the and price have terms at

Nordstrom top previously we carried the XX As at are mentioned, XX% also Rack. brands Nordstrom at of

open-to-buy an we us position provide brands. levels strategic inventory healthier are and our forward, into Looking leaning

have accounted our half track brands more We're to flow. and to for a up these of in of of to are XXXX, current well still to the in sales place deliver we they improve open for on With of newness While by brands, assortment more 'XX. make buy order XX% access stream the constant half a in first on good Rack environment, especially mid-'XX. the inventory positioned and great Rack

have This new us A of Rack for of through expand we encouraged of the closer-to-use greater three newest inventory in proof which performed at in part second by on terms and results expectations stores point brands, flow. the product the strategy, further to is working are business confidence mix gives a better newness reach strategic as with the exceeded in productivity. we're initiative our focus and average our towards and than opportunity improvement fleet stores, our our Rack sales

online capabilities, By of sales and initiative both and brands customer driving The nordstromrack.com stores. engagement the and will increasing leveraging nordstromrack.com. in digital third penetration strategic traffic our we and drive Rack profitability at marketing our is with at greater

to across continue also drive banners. We engagement omnichannel

pick one five online, buy just in at we service our this Rack three after example, launched For actually store in years orders ago. are nordstrom.com, up up stores picked

with productivity. inventory The both increasing entering area position. XXXX across in This started inventory is banners of second our a healthier focus

plans conservative macroeconomic with consumer outlook place, in have buy we on consistent our continued pressure forward, spending. Looking for

enables on which while faster increase plans, are reserves increasing maintaining buy drive newness We inventory to with XXXX in turns also increased be XX% we are over our also opportunistic least the flow and return at and for investment. us planning inventory our against season, to an of

to We shrinkage. to are shift greater our at through level to track cost for It precision also efficiency ability capabilities greater deliver our increase and buy, allocate the investments us and across also will the internal level, the merchandise in manage and inventory store will RFID unit level the reduce and profitability customers. a capabilities provide accounting help relevant us visibility in the at assortment These improve network our for enhancing unit with merchandising. our at fresh

strategy. unit essential customer to a highlight changing part and our optimizing some rolling this our ongoing cost our capabilities Our our be significant on this in from as We an ordering experience made built suppliers also both despite area, flow to momentum few. and out to by We partnering focus shipment year. throughout standards, improve initiatives continuing suppliers with third closer-to-use the practices supply further customers enhance as of of XXXX profitability I'll our on chain several pressures. well we'll progress is

distribution on and centers data improved throughput team our member unit than focusing more leveraging fulfillment retention training. scheduling We and better and by in flow, productivity and for through XX%

Lastly, to we overall. click from speed delivery increased delivery

right within delivered improve to customer continue the up four assortment last reduce actions For depth by with or will XX% less to us instance, is year. markdowns allowing the These our right customer. increased sell-through days closer orders share the of from place to and experience, the

well additional further as efforts chain We throughout these supply as benefits XXXX. see expect to actions from from

With to customer to commitment entering XXXX want and are profitability. customers our agility are for we thank team experience priorities ongoing our closing, increased financial feel on over We best. improving results. In Michael our our the it turn to focused key and their our that, I'll helping positioned good to for and for look their especially discuss

Michael Maher

and for Pete. you, with walk fourth XXXX. Thank our our results through I'll fiscal outlook then quarter begin

Net we per For GMV of share earnings reported the fourth $X.XX. in each quarter, X%. decreased sales

were banner the year, For decrease store net decreased with in versus up a total GMV all full sales last of over the X%, starting In third the X% little this Rack and X% decreased Nordstrom GMV year. X%. revenue, quarter. fulfillment sales and to QX, elimination attributable sales Nordstrom half Rack of decreased

disciplined an sales decreased basis impact as we fourth a least quarter decreased decreased approach points, quarter year sales inventory XX% inventory XXXX including and improving a prioritized We to from to in a estimated compared primarily a goal Gross sunsetting earlier management a committed in eliminating Rack XX% XXXX X% in this to percentage Trunk to remain XXX rightsizing Digital by start fiscal of in from XX%. store profit higher Ending Club to point turns at basis decrease XXX sales. with ago due net position. of healthier markdowns fulfillment a XXXX. as inventory

Despite than year, primarily lower supply percentage efficiencies. due expense total basis sales fourth net sales XXX SG&A decreased to of points as quarter, the in last chain a

we're on made the quarter, transportation supply chain our we pleased and progress last labor optimization initiatives with As with cost despite pressures.

these continue initiatives benefits X.X% deliver fourth for expect was the XXXX. in to EBIT We significant margin quarter. will

X.X%, the margin adjusted was EBIT For year, was margin X.X%. and EBIT

credit. and the revolving strong quarter ending million $X.X a fourth of financial on billion the have $XXX We balance position, our available sheet liquidity, line available in including full with

start our I'll the XXXX by to outlook. underlying the assumptions macroeconomic our related and discussing guidance. backdrop Turning

inflation to weigh in elevated especially will rising that consumer on first half expect interest We and the rates continue spending, the year. of

inflationary our costs. continuing labor pressure and anticipate especially transportation on also expenses, We

However, freight chain dissipate, inbound costs to we also and expect global disruptions inventory supply flow. benefiting to continue

versus for This fiscal decline includes into we outlook these XXXX. significant calling factors revenue consideration, X% items expect worth X% two to Taking XXXX, to out.

percentage wind our of approximately first sales X.X point negative which the Canadian The impact XXXX. in from delivered million $XXX an is operations, down of approximately

positive The sales $XXX from point fourth will impact which quarter. week expect the second we is million an approximately approximately XXrd in percentage to fiscal XXXX, X.X the add in

half of between shape outlook the Next, factors first favorable the Year-over-year XXXX. expected XXXX, in comparisons difficult three against I'll more second first half. comparisons will that sales and stronger highlight our with in more in half the first be half second our the

quarter shift In sales addition, one negatively week into quarter points. by year. impact from second sales of basis approximately the quarter anniversary this the This will and second sale third the XXX will quarter positively impact third

expect into second to as continues We business build in the improvements new we our stores. especially and improve, open the in our merchandise half assortment to Rack

in Rack beginning We will discontinuing impact of fulfillment lap the the store quarter. third also online orders of

in increase double-digit As decrease a percentage second the first result factors, of single-digit to versus expect these low the revenue a and half by percentage half to we a in XXXX. low by

pretax charges our to result year our in first quarter the full write-off in of our Nordstrom related charges investment to onetime the reduce $X.XX of These of XXXX, Canada. to will the to $XXX Canadian million quarter per approximately expect earnings primarily first of and $X.XX. share $XXX wind operations by We in down million

Excluding we XXXX. X.X% year of adjusted an these in versus full EBIT charges, the expect to approximately margin X.X% for X.X%

focus on the by elevated margin XXXX. to expansion inventory in our margin from in half improvements the forecast Our year EBIT especially markdowns adjusted will primarily compared be of gross that we second driven assumes took the productivity, when

in million. gross occupancy by the profit of part margin. of points of onetime buying improvement The EBIT reflected of costs XX will associated margin charges as improve and also most wind Canadian our EBIT, approximately $XX operations with down excluding basis

initiatives, Continued cost from partially our help chain resulting mitigate deleverage optimization progress SG&A will lower sales expense and supply inflationary on pressures.

second Given gross previously of trends, offsetting EBIT in the first the half margin decreases mentioned margin expect year lower from of sales year. the we and sales increases the in the half

will roughly be Our quarter EBIT plan that first breakeven. assumes

be which to expected is basis the estimated an XXX XX% fiscal Canada from rate the onetime charges. tax impact for effective Our point includes approximately year

rate, expected to excluding this be Our tax XX%. approximately impact is

to $X.XX earnings per $X.XX. expect share We of

operations, the wind $XXX to related share of of down to expect charges earnings adjusted Excluding million. $X.XX Canadian we per

earnings per projections share the impact any. of exclude share Our repurchases, if

our unchanged. priorities allocation, remain capital to Shifting

investing is long-term and growth. support better priority our in business first customers Our the to serve

X% X% chain planning capital supply in are investments net for We and primarily expenditures capabilities. to of of sales, technology

Our second priority an earnings reduction. debt our committed reducing rating is leverage. through investment-grade a of to and We remain improvement credit combination

below time leverage at year X.X a ended ratio to time. target We the continue X.X and

to continue of return quarterly of dividend a to $X.XX week, our We Directors Earlier cash cash shareholders. share. this per declared Board

stock approximately of In price $XX our repurchased of share. an million addition, during we XXXX, average per at $XX fiscal

$XXX our current on have remaining million authorization. share We repurchase

to cash will aligning measured a take flow our share and We repurchases continue with approach conditions. market to

execute As continued steps agility to we given are you've today, backdrop. significant macroeconomic challenging taking the heard with

We are at profitability a chain Rack, prioritizing disciplined approach increase inventory our through supply initiatives efforts. greater optimization progress continued to that on and will productivity drive improved performance

are in time. uncertainty of shareholder We to and to navigate significant about and economic deliver ability value our excited ability remain the our through future confident our over business

With we're for questions. that, ready Sarah,

Sara Penner

Thank you, Michael.

Before now ask Q&A we question session. with to get to one started Q&A, one please participants themselves and follow-up. the limit We'll move that we

Operator

Instructions]. [Operator

Our question. your Please proceed Brook Goldman first with with from question Roche Sachs. comes

Brooke Roach

bit brands? important for are and I'd provide impact context your seeing afternoon much, the currently bit Rack inventory profit What at How business rightsizing the the your my from initial on you. growth to you to sales forecasting a a love sales positive can little Thank focus more on most cadencing of digging the And so you on throughout comparable year? line thank rebalancing efforts? to Good business. more in Rack taking you little the question. you are time spend time

Erik Nordstrom

take of what year. flow shot that the let the ahead This bit way through inventory talk at the contemplated Pete is we've Thanks. revenue I'll little and front. Michael. and first about seeing And then on Yes. I'll we're go availability the a

So are of all, first and the as in first year. factors the on you we mind stronger foremost of -- year there's first starting of lapping about think a number top last just being much half to there line, bear we're a off

year-over-year were first in year. quarter we first in XX% quarter, the last up In particular, the

So, start a tougher we we've out. comparison as got the just year

quarters. expect as Rack, of as we We expect to place a have, somewhere through then we brands next in stores. couple opening around Rack to benefits get we second middle of assortment targeting pronounced And will in of the we're so most of will here talked the in the we're we've about, the improvement we get we'll the half the see year, but building Those also also sequential new it begin strategic our into some where But year. we're the first go half. the as be as spring,

of impact finally, we fulfillment, then -- third And the in you've quarter last of just Rack store the eliminating you've year. which got did

results Rack so going talk this of into the to the and little well the at were overall want And how that bit shape year, sort third we availability? about as and factors get aren't what headwind Pete, in we positioning against Rack revenue guidance. quarter you into That's inventory further. any when a that step-up the do of that a

Pete Nordstrom

us way. a know, could with ago lowering a a see work maybe Rack you over Sure. we that as customers that to AUR bargains try Yes. strategy. figure We've And now, of bit two our couple years we gather little the a had last of strategy years more went if lot to to out done

able offset is ways, lot lower we've and where knew we all we quality offer. in something I not the focused. the secret the of that way brands, did, the of really, the kind the we're sauce the whole to along AUR. validated learned think we're for a what off-prices really And is In why that's thing of great price maybe great enough, us but to brands is

we banner the that's XX% Rack about We wouldn't they the a typically talked in -- they Nordstrom customers Norden brand, good in the brands look for our We top know off-price the do year available a brand just find And really could thing that lean are to But because that other of XX positions, we And to were Rack. come retailers. be in be switch position us. to to for the this from buys we where those last that but well, brands. inventory, we inventory opportunistic to had hurt and have us. about

position to product we seasonality, get now aggressive to be to markdowns and there ourselves strategic and spot open a bought took the clean we And of really into these to there, to categories. ourselves There's it. good So, with chasing 'XX top brands. it out We're out with in buy. for balance starts have get a good the age

Operator

with Next JPMorgan. is Boss Matthew

Matthew Boss

Thanks. Great.

half that lower the end? So, cited Erik, in Michael, just more particular, that the -- more could just up in maybe you income could of you're to softening could think of across the front seeing And trends of in of elaborate low or recent half year. on digits low on down designer income maybe touch in you you bridge the at help your side. And digits revenues single trends the on seeing you're the the phasing I year, maybe double cohorts back the then, the you walk terms phasing confidence through

Erik Nordstrom

areas, to clear the have challenged, our say board is think that look and at customer seen discretionary across softness pullback our it's in it's a softness, Rack in pretty business. When customers. that I safe particularly But cohorts, and the more Matthew. in customer we've our Yes, income lower pronounced seen that across we some our we there's

into I go deeper. that For designer, think little a Pete can

Pete Nordstrom

what I Yes. quarter. this I've best-performing The in cider last I one or XX our month last to was -- say context, us, for this didn't may designer of put on quarterly business first think categories mean, be been the the years, call I last

history year, this we context. ever put quarter keep than here. more not our of to the it's And sales one done context, think last trend I a important make refiners I did mean in we've is company. in in So, different it to a

double-digit increase. We had

sales is dropped happened very a So, increase with double-digit we that more to that normalized had large our going precipitously to trend levels. us rather what though

we a too with this And moment. result, now, find inventory so, ourselves in as right much designer

working and things in we'll happen we're business, to some this onward in some through But the we'll And that. through able so, term. to have these adjustments near cyclical that, be and make on work

the of a is good interest think have something expect. a have long customers I our and it's customers partnerships our news to period in our overall what time continues business, to over business our good part But and and there. showed of really strong designer again, that's success, we important the be an important and

Michael Maher

between Matt, So, about second had cadence first you asked the revenue half. the the and

let So, the few out a outlook me there that talk about factors to way. us led that set

all, first in first So XXXX necessarily the perfect that of comparisons difficult more baseline. is Not those half. the

digits the last progressed of relative the mid-single relative up were half first half mid-single that, the But digits. year at just we in of down to if year, we XXXX. look in way you were year, the to the And back

you sense current we've gives the on just a of got So rate, comparison that. the order run magnitude of easier an that of

The other is digital about we our choices Trunk XXXX, those sales or fulfillment both around in also made Club we've business. earlier is talked thing and discontinuing Racks

be of second in and together it the. things. XXX about year, basis worth the lapping And the headwind it We'll half. to -- of half those disappears first then is that points the So fully essentially

-- is actually, thing things. Last well, more two

between will very points be I won't mentioned will first half second that openings, half spring, half two. the about be in One points and And and though. the it's effect QX. to year, big. It the one couple of finally, points the the new about equates but them between anniversary store worth XXX of cumulative QX XXX That the week, timing of hundred roughly begin a then one basis basis to the shift Rack basis half is of

the gets So double-digit together, first of the put those and a all it low year and the you us in to back increase decrease low single-digit things half in half. --

Matthew Boss

helpful. Very,

Operator

Capital is with Zatzkin Next Noah Markets. KeyBanc

Noah Zatzkin

taking question. for my Thanks

half. position on through helpful. environment would the you've compares the Thank the as a what thinking be back in margin year, to color helpful. puts cadence with particularly obviously, on exiting be inventory any in seeing relates year, we any and year become of should be promotional about moving just the color Just easier gross healthier it planned been in the you. But exiting would takes the

Pete Nordstrom

is our inventory levels. on This Yes. has promotions do own our biggest factor to Pete. The with

quarter So, level doing. that our it respond the to. and to fourth had own you was increased we of activity us, There for competition our most own regular that was to in saw markdown that really was promotional But things. largely happening

responsive think is next this more a retailers rhythm with I how forward to can't what position year be to should a going you what what's normal see going their So, impact other inventory control is on that. of And that. We business. and promotions to level, our the at certain we have

now, we our we're lot to position. a see to But can better more markdown normal of with Confidence much plays is So, that tell inventory out. you in going for that how because return we'll cadence

Michael Maher

for add I'll a to Michael. And Noah, outlook just it's of more level normalized gross our that, margin assumes markdown. that

anything That's contemplated that expect, quarter against inventory see as turns, then of you level that meaningful fourth should But that, but like normal the discipline improvement. kind that pockets a or best would have in do some first be we go expect just at cadence as we'll We some elevated we a normal clearing in the So the through of not level. historic greater just year. we well. remaining and in half there any of markdowns

Noah Zatzkin

Very Thank you. helpful.

Operator

Jefferies. Blake Anderson is with Next

Blake Anderson

Thanks for taking my question.

to So, guide ask, medium-term on I ago. years previous you wanted the provided a of couple

the margin about thinking Just targets.

do which billion guide $XX.X in implies operating margin you're below -- a guide. could margin you this revenue, you're least slightly the said X.X% margin had year. what on you think that I at your if is

that revisit think X.X%? to you of to back at So to you plus. And X% second back how wanted target do we bridging how then I about least get

Michael Maher

achieve than Blake, take margins of revenue Michael. inflationary We and not at in environment we line We're seeing sustainable this talked sort normalized are a targets single-digit in we that. that pressures. can low it's I'll beforehand. on those top better some normalized achievable remain growth the Yes, right a the a with shot on first We environment point. believe macro also at we about headwinds consumer spending did we're comparable of quite now believe

of overhead a might took in we as back But you out our recall. meaningful costs amount XXXX,

And meaningful which, occupancy largest in of drive for is the sales a buying our element efficiencies supply as SG&A. driving as know, to well, percentage us. gross chain, continue been profit of our you now and down as our is which of We our a we've component

element that once equation low single-digit positioned last we're we're and the can in to EBIT in macro growth, sustain really, sort of those we margin environment line top target. normalized for So believe generate achieve where we a is us long-term

Blake Anderson

follow you that Okay. wanted then And at the about then talked excess how being environment year the up just inventory. a mean all? inventory this you've well? benefit. potentially much see in on for Did are RAC baking you. And you I to in that QX as Thank

Pete Nordstrom

into the our but great We chase it started to level. because weren't up really position we were fourth to still inventory quarter, it we in a see in cleaning

buy start Rack. going in be us to to open completely all mean that things brands good some I I of and of I the think us and So, we're our again, a level gives the a flipped of we position recipe switch in it's transform say to the it's inventory. doesn't to forward, get balance that sudden, But the we're that's fair the think going for overnight, newness that a one receiving confidence. of

Blake Anderson

Okay. much. Thanks, so

Operator

Ed Yruma Piper Sandler. with Next is

Ed Yruma

Hi. Good afternoon guys.

digital special digital in a but underperforming you items, guess question. your these have the comp new The initiatives Omicron. housekeeping of because kind be was And stores, store how more that we a outperform that I bit. storage First, kind know much what business sales some health should does of or underway to in contribute I XX seems it there? -- you. think growth just easier even to restore I ‘XX, maybe line? of the to back ex Will little in how guess, -- Rack do and little stepping of about 'XX? business Thank a

Michael Maher

could the to approximately bit then generally Erik contribution. is back as digital going store new to a business. more and and for digital, And Rack XXX just the far to year, then that's points outlook speak I the as with trends about be start I'll the half talk It little let our weighted. basis Ed,

of pretty comping the trends when we in lot a mentioned, reverse saw digital, saw to of the Yes, traffic the off last that and we fourth Omicron we're fall So in of a in quarter terms the year-over-year and in quarter of you that store so year of the year. shift middle way this as meaningful

Stores more then your little penetration in digital decisions a year the profitable. -- suppressed have growth, are some point, a that be growth, half bit at helping and our expect lapping we're -- continue made we probably showing again. demand us into retreat I'd half last -- of the year, to of as that we're especially we're first last a that what especially the getting in least out you'll pent-up strong the were there still first saw of to for was recall but we strong digital

a business. XX% we So, remain digital

continue impacts, We you timing of add our we're I as Erik, meaningful some normalized. that? should part it think past we business. see those overall on And once anything to see of a want to growth

Erik Nordstrom

Yes.

made top growth, of order. focus digitally, decisions context, in we rack.com foot which I profitable piece digital, particular, store hurt stopping year think some a on of film on one last line to some our in

on XXX So about points our digital performance. basis

capabilities, It And But about with customers growth. a engagement as for been us, point to much stores to we our Rack very for orders. the Nordstrom.com online, want in But digital our successful opened as the for is do -- see like things up see buy continue isn't we it's Nordstrom.com, we and in growth so store. there pickup focus only particular, vehicle about us. pick pure customer up omnichannel

So not having capabilities only that brands have leveraging there. cross-channel we the but two

is I'd on for piece other area discovery. out, general The us call is a around work big which to

lot over around of new Our to success the years. newness brands our had strength customers something to is and a try inspiring them. and new introduce We've

is necessarily more if brands of a it's widely And And journeys more aren't being start but online, digital their in not up of store. distributed. that, discovery part it's they real and the experience end up important exclusive customers and that product, aren't even as

we lot initiatives something of is discovery a that this year. So, around have

Ed Yruma

Thank you.

Operator

Next Haskett. Grom with is Gordon Chuck

UnidentifiedAnalyst

Chuck. on for Eric This is

the this I acceleration about understand of being talked consumer guess the particularly Rack You to customer pressure, the trying in openings -- year. more under the so Rack

So under why until a the is have footing? business wait steady on been comps and doing not it now maybe pressure, little more

Erik Nordstrom

a great It's question.

First stop. full and foremost, on our Iraq stores are investment, a great return

average a investments, recent use plan. and most proven are of to share fleet recent investment it's them Rack. capital We track EBIT them of outperforming these openings margin. are low store a proof on great of return sales capital beating It of All point our have model, in -- on three be a All would three and productivity low-risk and our the record strong real is stores.

And off-price back stores. of And sell a off-price lends little part for you bit, requirement a a if to real lot the process in customers around that, and particular, of is convenience. to step discovery

that So, clear more lot seems having to fleet And a provides our us underpenetrated. more stores convenience. sure, is

we our at there room lot others to for a of growth look count store see You compared there. out

other The Rector stores. XX% the new more acquisition call our just occurred in source It's customer Rack us. to ecosystem. do out remain than of stores is for acquisition piece Rack our of would customer I what largest new

all So, lot there's open goodness stores. just a around for of us Rack

Michael Maher

said. I just a which things Eric's investment, comment is add little about store the of one They're Eric, Rack investment. underscore a would you capital being to great

Rack XX% plan. year cumulative than Just to expenditure in our new going our total less openings investment this be to of capital that, highlight store is though,

good So, really talked that we I that about feel commitment about. the making getting and returns

UnidentifiedAnalyst

card anything increasing with portfolio you just sort the business, shapes consumer there? And is the think talks at are look the in how spend of portfolio, delinquencies, in sort on of that in you you credit When your the XXXX? seeing way your anything Great. customers to of going

Michael Maher

COVID of with see consumers issuers. what as bit declining down the excess portfolio in similar little levels and we've and delinquencies were back year. metrics year, to where charge-offs good with pulling paid historically general, see they credit stimulate out sort on Well, we a at is a of at reported Yes. But little were of what money for more historic our balances, last card card lows. larger In we've there seen We credit from consumers were seen a savings, out reminder, just broadly they coming last bit terms discretionary categories. context,

back pre-pandemic we're than to And for still us something more normalized levels. actually now, but better

seeing finance in with will charge balances, what higher revenue rates. income. similar some That we'll and guidance a we percentage expect So, loss by of get what we that offset to be total we're and was our is 'XX see revenue. higher fee higher be now and Overall, credit think contemplated our will

Operator

from Cowen. comes Chen Our question TD last with Oliver

Oliver Chen

Eric Hi, Michael. Peter and

few categories sales from inventory, the should opportunity there's think about cost Also, the next see to a and do inventory accounting big in opportunity? inventory you as relative we to of inventory And growth growth method. the most the cost then Regarding mentioned to how mentioned, you turns. increase for method quarters? retail also the you Which switching

Thank may understanding and profile. on and gross that return or love more decision-making it impact That inventory be the may very how sounds could margin terms information timing of and would helpful you. not agility like in on customer-centric

Michael Maher

then I'll I'm Thanks, the in and well. question. let chime for to as Pete going Oliver, start,

versus we with should change in in in turn, all, in see, kind of be terms than you inventory growth levels sales that yes, of sales of improvement First inventory. be lower we the XX% to better inventory than Whatever of terms better expect or should the sales.

precise have let method. managing think categories We for turn you But which him, before absolutely to said. made Pete most is it inventory, for focused gives as over good to the It I'll agree. opportunity address item much opportunity. switch and we we're in be want where merchandising. real the our I add specific the that quickly more us We've internal to customers, I cost just the to speak the way

Do to our -- the just you for reporting? to external won't is accounting there external and you retail clarify, though, financial on method our want reporting. change We that no remain

see to impact won't you you want any gross that? do to add our to So, Pete, margin. reported

Pete Nordstrom

the biggest blanket turn, With across is improve choose or one. -- apparel, up all Rack there's probably we particularly apparel but a I all probably the I opportunity room is probably I'd think the board categories, across in have also the is say banner, Yes. of would mean, answer that say, I if say I'm the to Nordstrom in to version I'd the

and probably have terms have say the you. I'd perishable that what that reason is stuff most the we seasonality And its in of

markdown not board. in margins across of back starting we've Belton use and we've opportunity And as there's through year how context a rates gone that turns accordingly. the and really we that our really planning and but -- So last our historical impacts kind and and is best had best what guide, the at done

is so board. across the And think yes, again, I answer the

Oliver Chen

Thank okay. That’s you.

Sara Penner

presentation Thank interest A Nordstrom. for prepared thank for remarks, replay, in with want website. available our your to one joining slide We year you you call. and the for today's on be along will

Operator

teleconference. concludes This today's

this your You disconnect your you we time, may at and thank participation. for lines

Nordstrom (JWN) 2 Mar 232022 Q4 Earnings call transcript