Nordstrom, Abercrombie Deliver Strong Earnings

123jump.com Staff
16 Aug, 2005
New York City

Investors react by bidding Nordstrom shares higher and ANF stock lower. The ANF stock dips on inventory concern and lower than expected earnings. Nordstorm revises the annual earnings guidance higher, investors cheer.

Nordstrom, luxury retailer reported second quarter earnings of $148.9 million or 53 cents vs. 37 cents a year ago on 7.8% revenue growth to $2.1 billion with same-store sales growth of 6.2%.

What is the company’s performance year to date?

Year-to-date net earnings increased 44 percent to $253.5 million for the period ended July 30, 2005, compared to net earnings of $175.6 million for the same period last year. Earnings per share for the same periods were $0.91 and $0.62, respectively.

Year-to-date total sales increased 7.8 percent to $3.8 billion compared to prior year sales of $3.5 billion. Same-store sales increased 6.2 percent.

What is the update on the company’s expansion plan?

No new stores were opened during the second quarter. Throughout the remainder of the year, the company plans to open three full-line stores. Stores will open in San Antonio, Texas at The Shops at La Cantera on September 16th and in Irvine, Calif. at The Irvine Spectrum on September 30th. The final opening of the year will be on November 11th in Dallas, Texas at NorthPark Center. Gross square footage for the year is expected to increase approximately 3.4 percent, from 19,397,000 to 20,048,000.

What is the revenue and earnings outlook for the rest of the year?

For the fiscal year ending January 28, 2006, the company is raising its prior earnings per share outlook of $1.70-$1.75 to $1.80-$1.90. This represents a 30 to 38 percent increase over the prior year. For the third quarter, the company expects three to five percent same-store sales growth and earnings per share in the range of $0.30-$0.35.


Nordstrom, Inc. is one of the nation's leading fashion specialty retailers, with 152 US stores located in 27 states. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 95 full-line stores, 49 Nordstrom Racks, five Faconnable boutiques, one free-standing shoe store, and two clearance stores. Nordstrom also operates 32 international Faconnable boutiques in Europe.


Abercrombie & Fitch, teenage-apparel retailer reported second quarter earnings after the close only to disappoint investors.

What is the company operating performance?

The company earned $55.6 million or 63 cents per share vs. 44 cents a year ago on revenue of $571.6 million. The revenue jumped 42% when counting sales at all 824 stores at Abercrombie & Fitch store, Abercrombie, Hollister, and Ruehl brands.

What is the knee-jerk reaction of the investors?

The shares of the company traded as much as 10% lower in the after-market on releasing the earnings as the earnings were 6 cents lower than average analysts’ estimates.

Same-store sales growth jumped

Overall same-store sales for the company jumped 30% and for the individual concepts sales grew 29% at Hollister, 57% at Abercrombie – children’s store, and 26% at Abercrombie & Fitch stores.

The company has opened 84 new Hollister in the last twelve months and plans to open 60 new stores during the rest of the year to take total store count over 300. Hollister achieved sales per square foot of $110 in the current quarter. Net sales at Hollister increased 82% in the quarter.

What is the store expansion plan?

During the second half of fiscal 2005, the Company plans to open approximately nine new Abercrombie & Fitch stores, four Abercrombie stores, 39 new Hollister stores, and four RUEHL stores.

The Company remains on plan to open its 34,000 gross square foot flagship Abercrombie & Fitch store, located on the corner of 5th Avenue and 56th Street in New York, in November 2005. The Company plans to open its first international locations in Canada in late 2005 and has established subsidiaries in Europe and Japan and believes it will open its first European store in 2006.

As a part of the expansion plan the company hinted that that in fall of 2006 it will open its first European store probably in London and open only one accessories-only store in New York to promote the new hand bag business.

The company estimates its total earnings for the full year in the range of $3.10 to $3.30 from the previous range of $2.80 and $3 per share.

Where are gross margins trending?

The company reported second highest gross margin rate of 68.2% in the second quarter vs. 65.3% in the first quarter and 70% from a year ago and 66.4% for full fiscal year 2004. In the conference call the company stressed that the last year’s gross margin was anomalous.

What is happening with the inventory and “denim scare”?

The company management stressed in the conference call that more than 75% of the inventories represent basics and denim which it believes is not subject to mark down risk. This is what the company had to say in the press release:

Inventories increased to $364 million from $227 million at the end of the first quarter of 2005 and $199 million at the end of the second quarter last year. Most of this increase is represented by denim and other basic merchandise categories which are not subject to significant markdown risk while fall fashion merchandise categories have been increased in line with the growth in sales. Remaining spring and summer merchandise levels are virtually unchanged from last year.

The company stressed that it is probably the only retail store that does not mark down denim and the company will not mark it down and plans to “own the full-price denim business”.

What is happening to the transaction value growth level at A&F?

The store transactions at A&F are up 16% and ticket value is up 10%.

The Company operated 355 Abercrombie & Fitch stores, 163 Abercrombie stores, 281 Hollister stores, and five RUEHL stores at the end of the second quarter 2005.