Nordstrom ends in Canada – Sourcing Journal

Nordstrom Inc., hit by deepening discounts and macroeconomic headwinds, reported declines in both sales and earnings in the fourth quarter and announced its exit from Canada.

Net income for the fourth quarter decreased to $119 million, or $0.74 per diluted share, from $200 million in the year-ago quarter.

Net sales declined 4.1 percent to $4.2 billion in the quarter from $4.38 billion in the year-ago period.

“We took decisive action at the start of the new year to right-size our inventories and position ourselves for greater agility in the face of ongoing macroeconomic uncertainty. We have also made the difficult decision to cease operating our Canadian business. This will allow us to simplify our operations and continue our focus on driving long-term profitable growth in our core US business,” Chief Executive Officer Erik Nordstrom said in a statement.

The Nordstrom division’s overall revenue declined 2.4 percent in the most recent quarter, while Nordstrom Rack revenue fell 8.1 percent compared to the same period last year.

Digital revenue fell 13.1 percent from the fourth quarter of last year.

“As we enter fiscal 2023, we are focused on improving the customer experience, improving Nordstrom Rack performance, increasing inventory productivity, and further advancing our supply chain optimization initiatives,” said Nordstrom. “We remain confident in the strength of our brands and our ability to drive profitable growth and provide long-term value to our shareholders.”

Pete Nordstrom, President and Chief Brand Officer, added, “While incremental pricing has impacted our margins in the second half, we are better positioned for a stronger 2023. Our actions have given us more flexibility to respond more quickly to changing customer demand and supply the novelty and fashion customers love.” Inventory levels are down 15 percent year-on-year and comparable to 2019 levels.

Commenting on the closure of all Nordstrom stores in Canada, Erik Nordstrom said, “We regularly review every aspect of our business to ensure we are positioned for success. We entered Canada in 2014 with a plan to establish and maintain a long-term business there. Despite our best efforts, we do not see a realistic path to profitability for the Canadian business.”

Nordstrom has begun winding up its Canadian businesses, both Nordstrom and Rack, and its e-commerce operations there, and is being supported by an insolvency practitioner. E-commerce has already ceased operations and store operations are expected to be completed by June this year.

The settlement will result in approximately $400 million in lost revenue and a $35 million improvement in earnings before interest and taxes this year, with costs expected to be in the range of $300 million to $350 million this quarter are exempted by the closure of Canadian operations. Nordstrom operates six department stores and seven rack stores in Canada.

For the full year 2022, Nordstrom reported revenue of nearly $15.1 billion compared to $14.4 billion in 2021. Net income in 2022 was $245 million compared to $178 million dollars in 2021.

For 2023, Nordstrom expects sales to fall 4 to 6 percent and earnings per share to be in the range of $0.20 to $0.80.