Nordstrom to close all stores in Canada, expects 2023 revenue to decline

Nordstrom, Inc. reported fourth quarter net earnings of 119 million dollars or 74 cents per diluted share and EBIT of 187 million dollars or 4.5 percent of sales.

For the fiscal year ended January 28, 2023, net earnings were 245 million dollars and diluted EPS was 1.51 dollars, with EBIT of 465 million dollars or 3.1 percent of sales. Adjusted EBIT was 502 million dollars or 3.3 percent of sales, and adjusted EPS was 1.69 dollars for fiscal 2022.

As part of its initiatives to drive long-term profitable growth and enhance shareholder value, Nordstrom also announced it has decided to discontinue support for Nordstrom Canada's business operations.

"We took decisive actions to right-size our inventory as we entered the new year, positioning us for greater agility amidst continuing macroeconomic uncertainty. We also made the difficult decision to wind down operations in our Canadian business. This will enable us to simplify our operations and further increase our focus on driving long-term profitable growth in our core U.S. business," said Erik Nordstrom, chief executive officer of Nordstrom, Inc.

Review of Nordstrom’s Q4 and full year results

Fourth quarter net sales decreased 4.1 percent and gross merchandise value (GMV) decreased 4.2 percent. Nordstrom banner net sales decreased 2.4 percent and GMV decreased 2.5 percent, while net sales for Nordstrom Rack decreased 8.1 percent.

Revenue for fiscal 2022, including retail sales and credit card revenues, increased 5 percent, while GMV also increased 5 percent. Nordstrom banner GMV increased 6.9 percent in the fiscal year.

The company’s digital sales in the fourth quarter decreased 13.1 percent compared with the same period in fiscal 2021.

Eliminating store fulfillment for Nordstrom Rack digital orders in the third quarter and sunsetting Trunk Club earlier in fiscal 2022 negatively impacted fourth quarter digital sales by approximately 500 basis points. Digital sales represented 40 percent of total sales during the quarter and 38 percent of sales for the fiscal year.

Gross profit, as a percentage of net sales, of 33.2 percent decreased 525 basis points compared with the same period in fiscal 2021.

"While the incremental markdowns in the second half impacted our margins, we are better positioned for a stronger 2023. Our actions have given us increased flexibility to react more quickly to changing customer demand and provide the newness and fashion our customers love," added Pete Nordstrom, president and chief brand officer of Nordstrom, Inc.

As previously announced on February 28, 2023, the board of directors declared a quarterly cash dividend of 19 cents per share to be paid to shareholders of record at the close of business on March 14, 2023, payable on March 29, 2023.

Nordstrom winds down Canadian operations

Nordstrom Canada has commenced a wind-down of its operations, obtaining an initial order from the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act (CCAA) earlier today to facilitate the wind-down in an orderly fashion.

"We entered Canada in 2014 with a plan to build and sustain a long-term business there. Despite our best efforts, we do not see a realistic path to profitability for the Canadian business. This decision will simplify our structure, intensify focus on our growth and profitability goals and position us to create greater value for our shareholders," said Erik Nordstrom.

Nordstrom Canada intends to wind down its Nordstrom and Nordstrom Rack stores across Canada, with the help of a third-party liquidator, and its Canadian e-commerce platform. The e-commerce platform will cease operations on March 2, 2023. The in-store wind-down is anticipated to be completed by late June 2023.

The company said, the wind-down is expected to result in an approximately 400 million dollars decline in total net sales and a 35 million dollars improvement in EBIT in fiscal 2023, relative to fiscal 2022, excluding the charges associated with the wind-down.

Nordstrom Canada operates six Nordstrom stores and seven Nordstrom Rack stores, as well as the Nordstrom.ca website, and employs approximately 2,500 people.

Nordstrom expects 2023 revenue to decline

The company expects revenue decline, including retail sales and credit card revenues, of 4 to 6 percent in fiscal 2023 versus fiscal 2022, including an approximately 250 basis point negative impact from the wind-down of Canadian operations and an approximately 130 basis point positive impact from the 53rd week.

EBIT margin is expected of 1.2 to 2.1 percent of sales, adjusted EBIT margin of 3.7 to 4.2 percent of sales, EPS of 20 cents to 80 cents and adjusted EPS of 1.80 dollars to 2.20 dollars.