Nordstrom 1Q16 Earnings Call Notes

posted in: Notes | 0

Blake W. Nordstrom – Co-President & Director

Comps decreased, inventories ended too high

” For the first quarter, we had a sales increase of 2.5% and a comp decrease of 1.7%, which fell short of our plan for a low-single-digit increase. Despite our focused efforts to manage through this current environment, we are not satisfied with our results. Given these sales trends, our inventories were too high, which puts pressure on our margins and necessitates additional markdowns.”

The promotional environment is very noisy

“Where we’re seeing a big miss is in our clearance and promo – promotional business. So what we take away from that is, number one, the clearance and promotional environment is really noisy. There’s a lot of excess product out in the marketplace. It’s certainly easy to shop online. There’s some heavy, heavy discounting going on. And we’re seeing that effect in our business.”

Price transparency is about customer respect. There’s no regionality online

“On price matching, it’s – the cause and effect is a little clearer online in our stores, the price transparency that the Internet provides. And we have been more purposeful for, I’d say, the last couple years of matching price on products online, really for big online retailers, wherever they may be because there is no regionality to e-commerce. And that has served us well in gaining trust with the customers. We do not look to price matching or price promotion in any way as being a big strategic lever and a way of driving our top line. We look at price matching as a customer respect and a customer trust issue; that when a customer comes to us, they know that they’re being treated fairly. And we think the clearest way of doing that and what customers expect is to not pay more for a specific item when they’re shopping with us.”

Michael G. Koppel – Chief Financial Officer & Executive Vice President

Making reductions to 5 year capital plan

Sure, Kim. Yeah, thank you for your question. I did mention in our comments that we are going through a thorough review of the capital plan which will result in a reduction of that plan. We haven’t articulated that specifically yet. We’re reviewing it with our board next week.

We continue to see a transformation in our business model

” clearly, as we’ve been talking for the last couple of years, we’re seeing a transformation in our business model. The e-commerce element continues to grow at a good pace and the impact of technology in digital on the customer experience continues to accelerate. So that would imply our commitment to technology and fulfillment and the things that continue to support that business is going to be something we’re going to stay very strong on. On the other side, we continue to see traffic falling off in malls. And how we think about our store-based asset will probably require some level of adjustment.”

James F. Nordstrom – Executive Vice President and President, Stores

Mall traffic down obviously hurts us

Yeah, Brian, this is Jamie. I think it’s been pretty well documented out there that mall traffic overall has been soft over the last probably couple quarters – we’ve seen some data recently over the last month or two that it was down, approaching double-digits. And we notice that. We are in – we’re primarily in malls.”

Lower mall traffic has affected clearance more than full price

And when we see mall traffic go down, it hurts us. And we can see that in certain areas of our business. Clearance sales is a good example of that. While our full-price, regular-price sales have been hanging in there, our clearance sales over the last quarter or two have really been down.