Release Date: June 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First-quarter sales results were in line with the high end of expectations.
- Better-than-expected adjusted operating margin performance.
- Strong customer reception to luxurious contemporary wardrobe assortments.
- Mid single-digit increase in full-price customer segments.
- Expansion of men's presence across all Nordstrom stores and plans to grow men's business to 30% of total revenues over the next three years.
Negative Points
- Total company net sales decreased by 7.6% year-over-year.
- Decline in Vince brand sales due to year-over-year declines in both wholesale and direct-to-consumer segments.
- Impact from the closure of three full-price and two outlet stores.
- Adjusted loss from operations in the first quarter of fiscal 2024 was $2 million compared to $0.3 million in the prior year.
- Operating margin expected to decline approximately 500 to 750 basis points in Q2 fiscal 2024 compared to the prior year.
Q & A Highlights
Q: What are you seeing in terms of international opportunities, particularly in Asia?
A: We are seeing similar performance internationally as in the US. We have opened two stores in Asia with inconsistent performance. We are focusing on understanding the Asia market and making marketing investments. (David Stefko, Interim CEO)
Q: How do store closures impact your year-over-year sales, and what is the long-term strategy for store expansion?
A: Store closures contributed to the year-over-year sales decline. We are focusing on core business and customer data platforms in 2024. We see opportunities for new and existing store expansions in the US and internationally in late 2024 and 2025. (David Stefko, Interim CEO)
Q: When do you expect the pricing and mix of outlet and non-outlet sales to normalize?
A: The reset period ended in Q1. Starting in fiscal Q2, we are normalizing wholesale off-price and managing inventories better. We expect this balance to be optimized throughout the year. (John Szczepanski, CFO)
Q: How should we think about the normalization of SG&A expenses?
A: The reestablishment of the short-term incentive compensation plan impacted SG&A deleverage in Q1. This impact should mitigate as sales build in the back half of the year. (John Szczepanski, CFO)
Q: How much of the $10 million cost initiatives were realized in Q1, and what is the cadence for the rest of the year?
A: The margin improvement will follow the penetration of sales by quarter. We are ahead of schedule in Q1 and expect a proportional realization of cost initiatives throughout the year. (John Szczepanski, CFO)
Q: What are the variables baked into your favorable revenue guide for the year, and what challenges do you foresee?
A: We are monitoring DTC trends and return rates. We expect a trend reversal in fall and holiday seasons and are confident due to a strong wholesale order book. (John Szczepanski, CFO)
Q: What are the growth opportunities in the men's category?
A: We are focusing on a new pant program for the men's category, which we hope will show value in the back half of the year. (David Stefko, Interim CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
