Amid a charge to earnings related to incorrectly calculated interest rates on its credit cards, Nordstrom’s stock tumbled by close to 10 percent in after-hours trading on Thursday (Nov. 15). The company reported earnings per share of 67 cents, which reflected a non-recurring estimated credit-related charge of 28 cents, compared to analysts’ estimates of 66 cents. The retailer also reported revenues of $3.65 billion compared to estimates of $3.69 billion.
Through a recent review of credit card accounts, Nordstrom said that some cardholders were being charged higher interest rates by mistake, but the company forecasts that less than 4 percent of cardholders will receive a refund or credit – and most of them will receive an amount less than $100. In a conference call with analysts, Nordstrom Co-president Blake Nordstrom said, “We have taken action, including the appropriate steps to ensure the problem is addressed and does not happen again. We sincerely apologize to these cardholders.”
Overall, the retailer reported total sales growth of 3 percent and a comparable sales increase of 2.3 percent. Nordstrom said in the call that “this demonstrated ongoing strength in our full-price and off-price businesses.” At the same time, the retailer recently celebrated the 20th anniversary of Nordstrom.com. The site has grown to approximately 25 million visitors a day, and, according to the executive, ranks among the top 10 eCommerce retailers in the United States. In addition, overall digital sales grew 20 percent year to date and made up 30 percent of the company’s business.
When it comes to brick-and-mortar retail, the company is continuing its expansion into Canada with three additional Nordstrom Rack locations in Toronto, Edmonton and Ottawa. Nordstrom noted the Rack stores open to date are performing ahead of expectations, and the company forecasts that more synergies will take place because of its off-price and full-price presence in the market.
In the United States, the retailer stepped into the Manhattan market by opening its men’s store in the borough. “We’re building upon our initial learnings as we focus on expanding our presence in this premier retail market with our flagship women’s store opening planned in fall 2019,” Nordstrom said. He also said the company recently introduced two additional locations of Nordstrom Local in Los Angeles, one in the Brentwood section of the city and another in Downtown.
The company also introduced a “Get It Fast” feature to provide customers with an expanded view of the company’s merchandise selection available next-day in the Los Angeles area. As of the offering’s roll out, Nordstrom said the company has seen a 50 percent lift in buy-online-and-pickup-in-store. “This is a great example of how we’re leveraging our digital and physical capabilities to increase convenience for our customers,” he noted.
Regarding the company’s supply chain, Nordstrom said investments have the potential to expand selection by four to seven times for products available same- or next-day in a market. For customers in the West Coast, for instance, the retailer plans to open a local omnichannel hub as well as a fulfillment center in 2019. Nordstrom said the facilities should improve the customer experience and increase inventory efficiencies.
Nordstrom also said that strong loyalty offerings allow the company to serve customers with increased personalization. The company has more than 11 million loyalty customers, which contribute 56 percent to year-to-date (YTD) sales and an increase of roughly 15 percent over last year. In October, the retailer rolled out The Nordy Club, which is designed to bolster experiences and services along with a faster earn rate for credit card members. “While it’s still early, we’re encouraged by the uptick in enrollment trends,” he said.
As the holiday season approaches, Nordstrom said the company is heading into the fourth quarter looking to make itself a destination for gifts. He said a combination of local market assets and digital capabilities – along with people, product and place – make the company well-positioned heading into the future.