Nordstrom Q2 results get boost from sales event, turnaround efforts

By Savyata Mishra

(Reuters) -Nordstrom posted a second-quarter profit that topped estimates on Tuesday, with sales propped up by its crucial Anniversary Sale event, sending its shares up nearly 7% after the bell.

The upmarket department store chain also raised the lower end of its annual comparable sales growth forecast to between flat and 2% from a prior view of a 1% drop to 2% rise.

The Seattle, Washington-based company aims to revitalize the business by focusing on high-demand categories such as women’s apparel to boost its profit margins. It has also reduced discounts and is selling more items at full price.

“Anniversary sales were driven by newness and fall fashion… including our Nordstrom (NYSE:) private brands,” President Pete Nordstrom said.

The event, which ran from July 15 through Aug. 4 this year, saw strong demand for sportswear brands, including On Holding, New Balance, and Vuori, as well as beauty products.

Its off-price brand, the Rack, also drove sales, and the company plans to open 12 additional Rack locations in the country before the holiday shopping season begins.

“Opening more Rack stores is a major part of Nordstrom’s current plan, so the positive sales certainly suggested that plan is working pretty well. … merchandising is probably working better at Rack too,” Morningstar analyst David Swartz said.

Affluent shoppers continue to spend, albeit at a slower pace, benefiting apparel chains such as Abercrombie & Fitch and Gap.

In contrast, rival Macy’s (NYSE:) lowered its annual net sales forecast last week, blaming higher promotions and weaker demand. Peer Kohl’s (NYSE:) is set to report earnings on Wednesday.

Nordstrom’s shares have declined approximately 3% over the past month. Analysts cited muted demand during the sale period, with Placer.ai foot traffic data suggesting July was the quarter’s weakest month.

The stock is up about 16% this year compared with a roughly 18% rise in the broader .

Total revenue at the company rose 3.2% to $3.89 billion in the quarter ended Aug. 3, from $3.77 billion a year earlier, almost in line with analysts’ average expectation of $3.90 billion, according to LSEG data.

On an adjusted basis, Nordstrom earned 96 cents per share compared with expectations of 71 cents.