Nordstrom Inc.’s balance sheet took a huge hit as the coronavirus pandemic kept its stores shuttered for half the quarter and led the company to postpone its highly anticipated Anniversary Sale.
For the three months ended Aug. 1, the department store posted a net loss of $255 million, or $1.62 per share, compared with the prior year’s earnings of 90 cents per share and profits of $141 million. Revenues, which it said were in line with its expectations, declined 53% to $1.78 billion. Market watchers had forecasted a loss of $1.48 per share and sales of $2.38 billion.
According to the Seattle-based chain, the results reflected the temporary shutdown of its brick-and-mortar fleet for approximately 50% of the days that make up the period, in addition to a roughly 10-percentage point impact from the shift of its annual sale event from the second to the third quarter.
Despite the Q2 2020 miss, president and chief brand officer Pete Nordstrom said he was “confident” that the company could improve sales trends in the second half of the year “and beyond.”
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“Our inventories are current and in-line, and we’re focused on amplifying relevant categories, brands and trends to meet customers’ changing preferences,” he added.
During the first quarter, Nordstrom cut back on its inventory by more than 25% to mitigate markdowns on seasonal items as well as bring in new products for shoppers. The retailer reported that merchandise margin trends had “improved sequentially and exceeded expectations” over the past few months.
Then in July, the company increased its inventory receipts to meet customer demand as it prepared for the yearly Anniversary Sale, which began on Aug. 4 with early access for members of its loyalty program, Nordy Club, and expanded to include all shoppers on Aug. 19. To date, Nordstrom said sales during the event are “tracking in-line with expectations.”
What’s more, the chain revealed that it was ahead of its target of $500 million in annual cash savings, thanks to reductions in operating expenses, capital expenditures and changes to its working capital. These savings, it previously announced, represent a reduction in non-occupancy-related overhead charges of of roughly 20% on an annualized basis.
“At the onset of the pandemic, we focused on protecting and enhancing liquidity, and we successfully executed on these plans,” CEO Erik Nordstrom said in a statement. “We are now pivoting to prioritize market share gains and profitable growth as we advance our strategies.”
Nordstrom ended the second quarter with $1.3 billion in total liquidity, including $1 billion in cash. (It has paid down $300 million on its revolving line of credit.) As of Aug. 25, it operates 355 locations — 100 of which are full-line stores in the United States and Canada, 248 Rack outposts, two clearance units and five Nordstrom Local service hubs.