Nordstrom 3Q15 Earnings Call Notes

Beginning in August, experienced a slowdown

“Beginning in August, we experienced a slowdown across our full-price and off-price businesses. We had a 6.6% increase in total sales and our comp sales were 0.9%, which resulted in third quarter earnings that were below our expectations.”

Main decline was transaction growth. Were able to adjust inventories

“While we haven’t seen a meaningful change to our customer growth metrics, we did see a decline in our transaction growth relative to the first half of the year. As this softness continued, we’ve been able to quickly respond, ending the third quarter with inventory aligned with our expected sales plans.”

We don’t expect trends to change as we head into the holidays

“As we head into holiday, we don’t anticipate a measurable change in current trends and we’ve made appropriate adjustments to our operating plans, including our inventory levels.”

Dropping EPS outlook to 3.40-3.50

“let’s turn to our 2015 outlook, which incorporates our third quarter performance and an adjustment to our fourth quarter plans based on current sales trends. When excluding the credit transaction impact, our earnings per diluted share outlook is $3.40 to $3.50 compared with the prior outlook of $3.70 to $3.80.”

Traffic is the big issue

“So traffic is really the big issue?”

“I think that’s right.”

We really don’t know why traffic is down, we’re just trying to focus on what we can control

“Clearly, there’s been a lot of commentary out there as to what potentially is causing this. It might be one, it might be all. At this point, our point of view is what we can do about it is we can adjust our operating plans. We can continue to manage our inventories appropriately and we could assure that our stores and our website has the right stuff to sell and that’s what we’re doing.”

We feel good about our inventory position

“We’re in the fashion business and there’s an ebb and flow there and our team is pretty good at reacting and managing as things are going up and things are going down. So we feel pretty darn good about our inventory position going into the fourth quarter and our ability to continue to react to business as it changes”

All we can tell you is we saw a slowdown in our business

“We’re not economists, we’re merchants. And we concur with you that if you get to a higher altitude and you look at the scorecard, there are a number of economic indicators that look real positive for U.S. and the consumer and spending yet all we can tell you is in our business, we saw a slowdown. And it was across the board, as Jamie talked about. It wasn’t regionally or a merchandise region or a channel. We saw, compared to our plans, a very similar reduction again across the board and it went for the whole quarter, and that’s why we felt strongly that we should plan accordingly for the fourth quarter that way.”

The consumer is saying something to us in retail and we need to get after it

“ultimately the customer is saying something right now in retail, in our niche, and we need to get after it”

There’s not really a seasonal component to what’s going on

“I would reiterate that there’s really not a seasonal component to where we’ve seen transactions slow down. Our coat business has been really strong having big increases. It’s just a traffic thing. We’ve got less people buying clothes this quarter than we expected and there’s really nothing else to point to”

Everything is really on the same trend

“We don’t really have anything dead at the bottom that’s really dragging us down. I know you’re looking for something that’s dragging us down. There’s really not. Everything is really kind of at the same trend that it’s been at least the last few quarters. ”

Clearly this is not as dramatic as 2008/09 but things have dropped and plateaued

“Clearly, this is not as dramatic as what we saw in 2008, 2009, which was a pretty significant change. We went from what was a mid-single-digit comp trend to a low single-digit comp trend. As the guy said, we’ve seen it across geography. We’ve seen it whether it’s in-store, online. We’ve seen it by category. But it certainly is at not that level of drama that we saw during that period. But you know what? One of the things that we have noted is that it did kind of reach this new plateau and kind of stayed there, and that is what gave us very clear evidence that we needed to respond and respond quickly”

It’s really apples and oranges vs 2008

“I would add that it’s really apples and oranges. It was a dramatic economic change that took place there at that time, and we have the opposite to a degree here. We have some positive economic indicators, but the customer is voting with their dollars in a manner were she or he came closer to the best here and all we can do is talk about our business. And what we saw in the third quarter was a reduction, about 400 basis points across the board our business. It wasn’t the wholesale change we saw in that 2008 time period, but it’s material because our plans were for a higher performance and it has an effect.”

It’s a demand issue, we’ve done what we can

“I think both Jamie and Blake mentioned that it appears that there has been a slowdown in overall demand from the customer who was purchasing what we sell. And what would cause us to get back to the higher end is that customer reigniting their demand. And I don’t think it’s any more than that. There’s probably a multitude of data points out there that are driving some of this. But in the end, we can only do what we can do from our perspective and we believe we’ve done it.”