Q2 2024 Nordstrom Inc Earnings Call

Operator: Greetings, and welcome to the Nordstrom's Second Quarter 2024 Earnings Conference Call. [Operator Instructions.] As a reminder, this conference is being recorded.

Speaker Change: Episode 2

Speaker Change: Greetings, and welcome to the Nordstrom's second quarter, 2024 earnings conference call. At this time, all participants are Nelson Olimo, who will begin with prepared remarks for all by a Q&A session.

Operator: If you would like to ask questions, please press star one on your telephone, keep that. If anyone's required operator assistance during the conference, please press star zero on your telephone, keep that.

Speaker Change: If you would like to ask questions, please press star one in your telephone key back. If I want to require it, hopefully it's assisted during the conference. Please press star zero on your telephone key back.

Operator: As a reminder, this conference is being recorded.

James Duies: At this time, I'll turn the call over to Jamie Duies, Head of Investment Relations for Nordstrom, Jamie? Good afternoon, and thank you for joining us today. Before we begin, I want to mention that we'll be referring to slides, which can be viewed in the investor relations section on Nordstrom.com. Our discussion may include forward looking statements, so please refer to this slide with our safe harbor language.

Speaker Change: As a reminder, this conference is being recorded. At this time, I'll turn the call over to Jamie Duies, head of Investor Relations for Northstrom. Jamie?

Jamie Duies: Good afternoon, and thank you for joining us today. Before we begin, I want to mention that we'll be referring to slides which can be viewed in the Investor Relations section on Nordstrom.com.

Speaker Change: Our discussion may include forward-looking statements, so please refer to this slide with our safe harbor language.

James Duies: Participating in today's call are Erik Nordstrom; Chief Executive Officer, Pete Nordstrom; President, and Cathy Smith; Chief Financial Officer, who will provide a business update and discuss the company's second quarter performance. Please note that when discussing our results and outlook, we will be referring to them on an adjusted basis for EBIT, EBIT margin, and earnings per share.

Speaker Change: Participating in today's call, our Erik Nordstrom, Chief Executive Officer, Pete Nordstrom, President, and Cathy Smith, Chief Financial Officer, will provide a business update and discuss the company's second quarter performance.

Speaker Change: Please note that when discussing our results and outlook, we will be referring to them on an adjusted basis for EBIT, EBIT margin and earnings per share.

James Duies: Reconciliation to the most directly comparable gap measures can be found in our Q2 2024 earnings press release, which is available on our website. As we begin, I want to acknowledge the company's April 18th announcement of the board of directors' exploration of potential avenues to enhance shareholder value and formation of a special committee to evaluate any proposal that might be presented by Erik and Pete Nordstrom to take the company private. The special committee will carefully evaluate any proposal that may be received and consider whether it is in the best interest of Nordstrom and all shareholders. We do not have an update to share on this topic and will not be speaking to it during our call today.

Speaker Change: Reconciliation to the most directly comparable GAT measures can be found in our Q2 2024 earnings press release, which is available on our website.

Speaker Change: As we begin, I want to acknowledge the company's April 18 announcement.

Speaker Change: of the Board of Directors' Exploration of Potential avenues to enhance shareholder value and formation of a special committee to evaluate any proposal that might be presented by Erik and Pete Nordstrom to take the company private.

Speaker Change: The Special Committee will carefully evaluate any proposal that may be received and consider whether it is in the best interest of Nordstrom and all shareholders. We do not have an update to share on this topic and will not be speaking to it during our call today.

Erik Nordstrom: I'll now turn the call over to Erik. Thank you, Jamie, and good afternoon, everyone. Thank you for joining us today.

Speaker Change: All now turn the call over to Erik.

Erik Nordstrom: Thank you, Jamie, and good afternoon everyone. Thank you for joining us today. I'll begin with our second quarter performance.

Erik Nordstrom: I'll begin with our second quarter performance. We delivered solid results in the second quarter with net sales of 3.8 billion and earnings per share of 96 cents. We grew net sales as well as comparable sales and expanded margins. At both Nordstrom and the rack, customers responded positively to newness and their favorite brands. The momentum in our digital business continued with net sales growth of 6%. Our teams executed well throughout the quarter and delivered a successful anniversary sale. We are pleased that our efforts are resonating with customers.

Erik Nordstrom: We delivered solid results in the second quarter with net sales of 3.8 billion and earnings per share of 96 cents. We grew net sales as well as comparable sales and expanded margins.

Erik Nordstrom: at both Nordstrom and the Rack, customers responded positively to Nunes and their favorite brands.

Erik Nordstrom: The momentum in our digital business continued, with net sales growth of 6%.

Erik Nordstrom: Our teams executed well throughout the quarter and delivered a successful anniversary sale. We're pleased that our efforts are resonating with customers.

Erik Nordstrom: During the second quarter, we made progress on our three key priorities of driving Nordstrom banner growth, optimizing our operations, and building upon the momentum at the Rack. Driving Nordstrom banner growth is a key area of focus. For us, it all begins with helping our customers feel good and look their best. We do this by offering a compelling selection of great merchandise supported by our commitment to service and experience. In our Nordstrom stores, we continued our efforts to provide a more consistent offering of the brands that matter most to our customers across our entire fleet.

Erik Nordstrom: During the second quarter, we made progress on our three key priorities of driving Norstrom Vanner Growth, optimizing our operations and building upon the momentum at the rack.

Erik Nordstrom: Driving Nordstrom banner growth is a key area of focus. For us, it all begins with helping our customers feel good and look their best.

Erik Nordstrom: We do this by offering a compelling selection of great merchandise supported by our commitment to service and experience.

Erik Nordstrom: In our Nordstrom stores, we continue our efforts to provide a more consistent offering of the brands that matter most of our customers across our entire fleet.

Erik Nordstrom: This includes ensuring that we have the newness, relevance, and depth of merchandise that are customers' value.

Erik Nordstrom: including our Nordstrom Private Brands, which were relaunched earlier this year. As we have shared previously, growing the digital customer journey is a key part of our strategy to drive Nordstrom Banner growth.

Erik Nordstrom: This includes ensuring that we have the newness, relevance and depth of merchandise that our customers value, including our Nordstrom Private Brands which were relaunched earlier this year. As we have shared previously, growing the digital customer journey is a key part of our strategy to drive Nordstrom banner growth. We have a new discovery as well as high in stock rates of our fastest turning items. In April, we successfully launched our marketplace and have since added over 15,000 items to our digital offering and nearly a hundred new brands. Over pleased with the initial response from our customers, marketplace is not yet a material driver and we will continue to scale it in the months ahead.

Speaker Change: In the second quarter, SolarSills growth at Norson.com was driven by an increase in our assortment across a balanced price points, improvements to search and discovery, as well as high stock rates of our fastest turning items.

Speaker Change: In April, we successfully launched our marketplace and have since added over 15,000 items to our digital offering and nearly 100 new brands.

Speaker Change: Or please with the initial response from our customers, Marketplace is not yet a material driver and we will continue to scale it in the months ahead.

Speaker Change: Operational Optimization is another tea priority for 2024, which is intended to further build upon the success we've had in optimizing our supply chain operations to surf customers with increased speed and reliability while lowering costs.

Speaker Change: Our business is driven by newness. Consistent inventory flow ensures we have the right product at the right time for our customers.

Speaker Change: are teams have made a lot of progress in this area which help drive the success at both Paners in the second quarter.

Erik Nordstrom: Operational optimization is another key priority for 2024, which is intended to further build upon the success we've had in optimizing our supply chain operations to serve customers with increased speed and reliability while lowering costs. Our business is driven by newness. Consistent inventory flow ensures we have the right product, at the right time for our customers. Our teams have made a lot of progress in this area which helped drive the success at both banners in the second quarter.

Speaker Change: At the Northstrom Banner, consistent flows drove regular price sales, including during the anniversary sale.

Speaker Change: We also processed inbound merchandise and returns faster, enabling freshness and all channels.

Speaker Change: And even with the volume of the anniversary sale, the rack had a steady flow of fresh merchandise throughout the quarter, which contributed to its high single digit sales growth.

Speaker Change: We've also made progress on implementing RFID technology across our locations. RFID enables faster, real-time inventory data helping us to improve the accuracy of our inventory.

Speaker Change: Not only does this technology provide us with new insights to improve product flow and reduce shrink, inventory accuracy enhances the customer experience, allowing us to fulfill the items our customer are looking for.

Erik Nordstrom: At the Nordstrom banner, consistent flows drove regular price sales, including during anniversary sale. We also processed inbound merchandise and returns faster, enabling freshness in all channels. And even with the volume of the anniversary sale, the Rack had a steady flow of fresh merchandise throughout the quarter, which contributed to its high single-digit sales growth. We've also made progress on implementing RFID technology across our locations. RFID enables faster real-time inventory data helping us to improve the accuracy of our inventory. Not only does this technology provide us with new insights to improve product flow and reduce shrink, inventory accuracy enhances the customer experience allowing us to fulfill the items our customers are looking for.

Speaker Change: During the second quarter, we made the strategic decision to cease buildout and planning of a least on the Channel Center, intended for future use in the Pacific Northwest.

Speaker Change: Logistics networks have recovered from the supply chain challenges that began during the pandemic and we've improved our supply chain operations over the last few years.

Speaker Change: We found that we can serve West Coast customers more efficiently from our existing supply chain network while avoiding additional costs to build out the facility.

Speaker Change: Therefore, we have taken an acid impairment charge that is reflected in our results.

Speaker Change: Turning now to our priority to build on our momentum at the rack. During the second quarter, we open five new rack stores, bring our year-to-date total to 11.

Speaker Change: We're planning to open 12 more new Rack Stores this year ahead of the holiday season. An answer results continue to be strong at the Rack Banner. Rack Stores that were open last year are performing well, delivering a solid return on investment while attracting new customers.

Speaker Change: The rack banners digital business is a differentiator in off price retail, enabling our customers to shop when and how they want.

Erik Nordstrom: During the second quarter, we made the strategic decision to cease build out and planning of a least omnichannel center intended for future use in the Pacific Northwest. Logistics networks have recovered from the supply chain challenges that began during the pandemic, and we've improved our supply chain operations over the last few years. We found that we can serve West Coast customers more efficiently from our existing supply chain network, while avoiding additional costs to build out the facility. Therefore, we have taken an asset impairment charge that is reflected in our results.

Speaker Change: We've built and refined, interesting, leading digital capabilities at NorstromRack.com, which delivered strong results in Q2. An expanded merchandise offering of great brands and great prices combined with a focus on InstaCreates drove the results.

Speaker Change: In summary, we are pleased with our second quarter results and the direction we are heading. In the quarter, we grew sales and expanded margins. Our teams executed a successful anniversary sale. And we made progress on our key priorities.

Speaker Change: This progress, along with our results, provide us with confidence in our full-year guidance.

Speaker Change: and with that, I'll turn it over to Pete.

Pete Nordstrom: Thank you, Erik, and good afternoon, everyone. I'll focus my remarks on our anniversary sale, touch on category performance in the second quarter and offer some commentary on our inventory health.

Erik Nordstrom: Turning now to our priority to build on our momentum at the Rack. During the second quarter, we opened five new Rack stores, bringing our year-to-date total to 11. We're planning to open 12 more new Rack stores this year ahead of the holiday season. Financial results continue to be strong at the Rack banner. Rack stores that were open last year are performing well, delivering a solid return on investment while attracting new customers.

Pete Nordstrom: Our anniversary sale is a unique event that rewards and engages our customers with brand new product from the best brands, marked down for a limited time.

Pete Nordstrom: The sale is meaningful to our best customers who look forward to the event each year.

Pete Nordstrom: We are always humbled by the stories we hear from customers every year.

Pete Nordstrom: We have learned about generations of shoppers that make the sale and annual family event, planning their summer activities around it.

Erik Nordstrom: The Rack banner's digital business is a differentiator in off-price retail, enabling our customers to shop when and how they want. We've built and refined industry leading digital capabilities at nordstromrack.com, which delivered strong results in Q2. An expanded merchandise offering of great brands at great prices combined with a focus on in-stock rates drove the results.

Pete Nordstrom: This year we had great participation in the anniversary sale, especially by our most loyal customers with 75% of our icon and ambassador Nordic club members shopping the sale.

Pete Nordstrom: Anniversary sales were driven by newness and fall fashion from the brands that matter most to our customers.

Pete Nordstrom: including our Northstrom Private Brands.

Pete Nordstrom: Growth and beauty sales provided support to Anniversary Success and the active category, which include shoes and a pair all, continued to show strength throughout the event, registering double digit growth.

Pete Nordstrom: As Erik mentioned, our Nordstrom private brands are gaining traction, especially in women's apparel. Our private brands delivered mid-Single digit growth during the anniversary sale with the Nordstrom brand and Zella as the top two volume brands of the event.

Erik Nordstrom: In summary, we are pleased with our second quarter results and the direction we are heading. In the quarter we grew sales and expanded margins. Our teams executed a successful anniversary sale. And we made progress on our key priorities. This progress along with our results provide us with confidence in our full year guidance.

Erik Nordstrom: Since the refresh of our namesake Nordstrom brand, it's become the most reviewed on our site and customer sentiment about it has grown impressively.

Erik Nordstrom: Our private brands help improve the balance of price points in our selection. Customers are finding that the merchandise is high quality and offers a great combination of value and style. Although we still have a way to go, we're encouraged by the progress our private brands are making.

Pete Nordstrom: This progress along with our results provide us with confidence in our full year guidance and with that I'll turn it over to Pete.

Peter E. Nordstrom: Thank you, Erik, and good afternoon, everyone. I'll focus my remarks on our Anniversary Sale, touch on category performance in the second quarter and offer some commentary on our inventory health. Our Anniversary Sale is a unique event that rewards and engages our customers with brand new product from the best brands, marked down for a limited time. The sale is meaningful to our best customers who look forward to the event each year. We are always humbled by the stories we hear from customers every year. We have learned about generations of shoppers that make the sale an annual family event, planning their summer activities around it.

Erik Nordstrom: Our anniversary sale provides us with a special opportunity to engage our customers and one way we do so is through in-store and online events.

Erik Nordstrom: We strive to make our Nordstrom's stores not only a compelling place to shop, but an interesting, fun, and engaging environment.

Erik Nordstrom: This year, our team's rolled out new events and offers to serve and engage customers.

Erik Nordstrom: which drove incremental purchase trips throughout the sale from refresh and expanded private shopping events to trunk shows featuring doodleful brands, our teams hosted over 900 in-store events roughly 20% more than last year, with nearly 500 of those events exclusive to our Nordic club members.

Pete Nordstrom: We have learned about generations of shoppers that make the sale an annual family event, planning their summer activities around it. This year we had great participation in the anniversary sale, especially by our most loyal customers with 75% of our icon and ambassador Nordic club members shopping the sale. Anniversary sales were driven by newness and fall fashion from the brands that matter most to our customers, including our Nordstrom private brands. Growth and beauty sales provided support to anniversary success and the active category which includes shoes and apparel continued to show strength throughout the event.

Erik Nordstrom: Customers responded positively as event attend its triple compared to last year.

Erik Nordstrom: We continue to focus on growing our New York City store. For all the obvious reasons, our New York flagship store is important to us.

Speaker Change: You're today, it is the top sale store in our fleet and amongst our fastest growing.

Speaker Change: In advance of our anniversary sale, we open our first ever icon lounge in that store. It is a place where our highest tier Nordic club members can enjoy a private lounge experience, complete with complimentary food and drink, as well as dedicated services to enhance their in-store shopping experience.

Speaker Change: Turning to category performance in the second quarter, our top performing categories were active, women's apparel, beauty and kids.

Pete Nordstrom: As Erik mentioned, our Nordstrom private brands are gaining traction, especially in women's apparel. Our private brands delivered mid single-digit growth during the anniversary sale with the Nordstrom brand and Zella as the top-2 volume brands of the event. Since the refresh of our namesake Nordstrom brand, it's become the most reviewed on our site and customer sentiment about it has grown impressively. Our private brands help improve the balance of price points in our selection. Customers are finding that the merchandise is high quality and offers a great combination of value and style. Although we still have a way to go, we're encouraged by the progress our private brands are making.

Speaker Change: The active category was our top performer for the 6th consecutive quarter, active sustained growth across both banners in the second quarter was sales increasing by double digits. This growth was supported by brands that include on, new balance and theori.

Speaker Change: Sales growth and women's apparel continued in the second quarter, driven by contemporary styles with notable strength and dresses and knit tops.

Speaker Change: In the Nordstrom banner, well known brands such as Vince, Sincaset and Free People were strong.

Speaker Change: At the rack, a key driver of the growth is a high degree of overlap with the brands customers find at our Nordstrom stores.

Speaker Change: We continue to focus the rack selection on these brands, which drove notable growth and women's apparel for the rack in the second quarter.

Pete Nordstrom: Customers are finding that the merchandise is high quality and offers a great combination of value and style. Although we still have a way to go, we're encouraged by the progress our private brands are making. Our anniversary sale provides us with a special opportunity to engage our customers and one way we do so is through in store and online events. We strive to make our Nordstrom stores not only a compelling place to shop, but an interesting fun and engaging environment.

Speaker Change: The beauty category continued to be a top performer for us at both banners. Its second quarter sales growth was supported by the strength of fragrances and hair care essentials throughout the anniversary sale.

Speaker Change: The Kids category sustained its momentum in Q2 as well. Baby Gear has been a solid contributor to growth and has become a more sizable business for us.

Speaker Change: The growth is a direct reflection of customer interests in this type of product as we've leaned into car seats and strollers with great brands like Nuna. Overall, customers responded well to our curated assortment which helped to drive and increase in regular price sales and margin expansion in the second quarter.

Speaker Change: Moving on to our inventory health, in the second quarter, our increase in inventory exceeded our sales growth for the first time in several quarters, as we invested in inventory primarily to support our existing rack stores, our new rack stores, and our digital channel, NordstromRack.com.

Pete Nordstrom: This year our teams rolled out new events and offers to serve and engage customers which drove incremental purchase trips throughout the sale. From refreshed and expanded private shopping events to trunk shows featuring notable brands, our teams hosted over 900 in store events roughly 20% more than last year with nearly 500 of those events exclusive to our Nordic Club members. Customers responded positively as event attendance tripled compared to last year. We continue to focus on growing our New York City store.

Speaker Change: While the growth was higher than we typically like, we feel good about the content of our inventory.

Speaker Change: We close the quarter with an increase in newness and a commensurate decline in clearance and age inventory at both banners.

Speaker Change: In the future, we do expect ourselves to inventory spread to improve.

Speaker Change: In closing, I'd like to echo Erik's comments. We're pleased with our second quarter results and confident that we are heading in the right direction. And with that, I'll turn it over to Kathy to discuss our financial results and outlook.

Kathy: Thanks, Pete, and thank you all for joining us today. I'll begin by covering our second quarter results, then discuss our outlook and close with our capital allocation priorities.

Kathy: In the second quarter, we delivered solid results with growth in net sales and EBIT, as well as margin expansion. Total company net sales increased 3.4% in the second quarter, driven by strength in both banners.

Pete Nordstrom: For all the obvious reasons, our New York flagship store is important to us. Year to date it is the top sale store in our fleet and amongst our fastest growing. In advance of our anniversary sale, we open our first ever icon lounge in that store. It is a place where our highest tier Nordic club members can enjoy a private lounge experience complete with complimentary food and drink as well as dedicated services to enhance their in-store shopping experience.

Kathy: The timing shift of the anniversary sale with one day falling in the third quarter this year versus eight days last year benefited net sales by approximately 100 basis points.

Kathy: Comparable sales increased 1.9% with positive comps in both banners and particular strength in digital channels. And GMB increased 3.5% in the second quarter.

Kathy: Nordstrom banner net sales and comparable sales each increased .9% and GMB increased 1.1% in the second quarter. The timing shift of the anniversary sale had a positive impact on Nordstrom banner net sales of approximately 200 basis points.

Pete Nordstrom: Turning to category performance in the second quarter, our top performing categories were active, women's apparel, beauty, and kids. The active category was our top performer for the sixth consecutive quarter. Active sustained growth across both banners in the second quarter was sales increasing by double-digits. This growth was supported by brands that include on, New Balance, and Vuori. Sales growth in women's apparel continued in the second quarter, driven by contemporary styles with notable strength and dresses and knit tops.

Kathy: Nordstrom rack net sales increased 8.8% with comparable sales increasing 4.1%. On a two year stack basis we are pleased to see the quarter over quarter sales increases.

Kathy: Digital sales grew by 6.2% in Q2, representing the fifth consecutive quarter of sequential improvement. The timing shift of the anniversary sale had a positive impact on digital sales of approximately 100 basis points.

Kathy: Digital sales represented 37% of total sales during the quarter.

Kathy: Gross profit as a percentage of net sales expanded 155 basis points to 36.6% on strong regular price sales, leverage on higher sales, and slight improvements in shrink.

Pete Nordstrom: In the Nordstrom banner, well known brands such as Vince, Cinq à Sept, and Free People were strong. At the Rack, a key driver of the growth is a high degree of overlap with the brands customers find at our Nordstrom stores. We continue to focus the Rack selection on these brands, which drove notable growth in women's apparel for the rack in the second quarter. The beauty category continued to be a top performer for us at both banners.

Kathy: Ending inventory increased 8.3% versus a year ago. As Pete said, while the quality of inventory is good and largely supporting the rack momentum, we aim to bring the inventory growth more in line with sales demand.

Pete Nordstrom: SG&A expenses as a percentage of net sales increased 160 basis points to 34.4%.

Pete Nordstrom: largely due to the supply chain asset impairment charge that Erik discussed. When excluding the $54 million charge, SGNA expenses increased 20 basis points to 33%. As last year's second quarter results, included a gain on sale of a real estate asset.

At this time, I'll turn the call over to Jamie Duies, Head of Investor Relations for Nordstrom, Jamie?

Pete Nordstrom: Its second quarter sales growth was supported by the strength of fragrances and hair care essentials throughout the anniversary sale. The kids category sustained its momentum in Q2 as well. Baby Gear has been a solid contributor to growth and has become a more sizable business for us. The growth is a direct reflection of customer interest in this type of product as we've leaned into car seats and strollers with great brands like Nuna. Overall, customers responded well to our curated assortment which helped to drive an increase in regular price sales and margin expansion in the second quarter.

Erik Nordstrom: Our EBIT margin expanded by 115 basis points to 6.4% in the second quarter.

James Duies: Good afternoon, and thank you for joining us today. Before we begin, I want to mention that we'll be referring to slides, which can be viewed in the investor relations section on Nordstrom.com. Our discussion may include forward-looking statements, so please refer to this slide with our safe harbor language.

Erik Nordstrom: Income tax expense of 42 million dollars or 25.7% of pre-tax earnings was higher than the 17.2% recorded in the year ago quarter.

Erik Nordstrom: Last year's second quarter income tax benefited from the favorable resolution of certain tax matters.

Participating in today's call are Erik Nordstrom; Chief Executive Officer, Pete Nordstrom; President, and Cathy Smith; Chief Financial Officer, who will provide a business update and discuss the company's second quarter performance.

Erik Nordstrom: Second-quarter earnings per share of 96 cents is favorable to last year's 84 cents, largely driven by the expansion of our gross margin and to a lesser extent expense management.

Please note that when discussing our results and outlook, we will be referring to them on an adjusted basis for EBIT, EBIT margin, and earnings per share. Reconciliation to the most directly comparable GAAP measures can be found in our Q2 2024 earnings press release, which is available on our website. As we begin, I want to acknowledge the company's April 18th announcement of the board of directors' exploration of potential avenues to enhance shareholder value and formation of a special committee to evaluate any proposal that might be presented by Erik and Pete Nordstrom to take the company private. The special committee will carefully evaluate any proposal that may be received and consider whether it is in the best interest of Nordstrom and all shareholders. We do not have an update to share on this topic and will not be speaking to it during our call today.

Please note that when discussing our results and outlook, we will be referring to them on an adjusted basis for EBIT, EBIT margin, and earnings per share. Reconciliation to the most directly comparable GAAP measures can be found in our Q2 2024 earnings press release, which is available on our website.

Erik Nordstrom: We ended the second quarter with $1.5 billion in available liquidity, including over $650 million in cash.

Erik Nordstrom: Our balance sheet and financial position remain solid. Before moving to our outlook, I'd like to offer some additional commentary on our second quarter results.

Pete Nordstrom: Moving on to our inventory health. In the second quarter, our increase in inventory exceeded our sales growth for the first time in several quarters as we invested in inventory primarily to support our existing Rack stores, our new Rack stores, and our digital channel, nordstromrack.com. While the growth was higher than we typically like, we feel good about the content of our inventory. We closed the quarter with an increase in newness and a commensurate decline in clearance and age inventory at both banners. In the future, we do expect our sales to inventory spread to improve.

As we begin, I want to acknowledge the company's April 18th announcement of the Board of Directors' exploration of potential avenues to enhance shareholder value and formation of a special committee to evaluate any proposal that might be presented by Erik and Pete Nordstrom to take the company private. The special committee will carefully evaluate any proposal that may be received and consider whether it is in the best interest of Nordstrom and all shareholders. We do not have an update to share on this topic and will not be speaking to it during our call today.

Erik Nordstrom: First, our efforts to improve the customer experience are taking hold as evidenced by the strength of our top line. In the second quarter, we grew our customer count, recorded and increased in customer trips, and expanded margins.

Erik Nordstrom: Second, our credit card revenues as a percent of total revenue declined modestly versus Q2 of last year.

Erik Nordstrom: The decline was driven by higher losses, partially offset by higher balances and yield on the portfolio. This was consistent with our expectations, continuing the general trend over the last few years as the consumer has faced increased budgetary pressures.

I'll now turn the call over to Erik.

Thank you, Jamie, and good afternoon, everyone. Thank you for joining us today. I'll begin with our second quarter performance. We delivered solid results in the second quarter with net sales of $3.8 billion and earnings per share of $0.96. We grew net sales as well as comparable sales and expanded margins. At both Nordstrom and the rack, customers responded positively to newness and their favorite brands. The momentum in our digital business continued with net sales growth of 6%. Our teams executed well throughout the quarter and delivered a successful anniversary sale. We are pleased that our efforts are resonating with customers.

Erik Nordstrom: Thank you, Jamie, and good afternoon, everyone. Thank you for joining us today. I'll begin with our second quarter performance. We delivered solid results in the second quarter with net sales of $3.8 billion and earnings per share of $0.96. We grew net sales as well as comparable sales and expanded margins.

Erik Nordstrom: Turning to our outlook for the year, while we are pleased with our first tap results.

Pete Nordstrom: In closing, I'd like to echo Erik's comments. We're pleased with our second quarter results and confident that we are heading in the right direction.

Erik Nordstrom: The External Environment remains uncertain.

Erik Nordstrom: When considering the puts and takes and appreciating that there is still a lot of this fiscal year left, we believe it is prudent to be appropriately cautious with our outlook.

At both Nordstrom and the Rack, customers responded positively to newness and their favorite brands. The momentum in our digital business continued with net sales growth of 6%. Our teams executed well throughout the quarter and delivered a successful anniversary sale. We are pleased that our efforts are resonating with customers.

Erik Nordstrom: We are updating our guidance for the year slightly.

Kathy Smith: And with that, I'll turn it over to Kathy to discuss our financial results and outlook. Thanks, Pete. And thank you all for joining us today.

Erik Nordstrom: Our updated guidance includes, full-year revenue in the range of a decline of 1% to an increase of 1%.

Erik Nordstrom: which includes a headwind of approximately 135 basis points from the 53rd week in 2023's results. We continue to expect revenue to follow a typical quarterly cadence.

Kathy Smith: I'll begin by covering our second quarter results, then discuss our outlook and close with our capital allocation priorities. In the second quarter, we delivered solid results with growth in net sales and EBIT as well as margin expansion. Total company net sales increased 3.4% in the second quarter driven by strength in both banners. The timing shift of the anniversary sale with one day falling in the third quarter this year versus eight days last year benefited net sales by approximately 100 basis points.

During the second quarter, we made progress on our three key priorities of driving Nordstrom banner growth, optimizing our operations, and building upon the momentum at the Rack. Driving Nordstrom banner growth is a key area of focus. For us, it all begins with helping our customers feel good and look their best. We do this by offering a compelling selection of great merchandise supported by our commitment to service and experience.

Erik Nordstrom: As a reminder, the timing shift of our anniversary sale, with one day falling in the third quarter of this year versus eight days in 2023, is expected to have a negative impact of approximately 100 basis points in our third quarter of this year.

In our Nordstrom stores, we continued our efforts to provide a more consistent offering of the brands that matter most to our customers across our entire fleet. This includes ensuring that we have the newness, relevance and depth of merchandise that our customers value, including our Nordstrom Private Brands which were relaunched earlier this year. As we have shared previously, growing the digital customer journey is a key part of our strategy to drive Nordstrom banner growth.

In our Nordstrom stores, we continued our efforts to provide a more consistent offering of the brands that matter most to our customers across our entire fleet. This includes ensuring that we have the newness, relevance and depth of merchandise that our customers value, including our Nordstrom Private Brands which were relaunched earlier this year.

Erik Nordstrom: We now expect the total company comparable sales in a range of flat to an increase of 2% in 2020-4 versus 52 weeks in 2023.

This includes ensuring that we have the newness, relevance and depth of merchandise that our customers value, including our Nordstrom Private Brands which were relaunched earlier this year. As we have shared previously, growing the digital customer journey is a key part of our strategy to drive Nordstrom banner growth.

Erik Nordstrom: As our fiscal 2020-3 included a 53rd week, we calculate our 2020-4 comparable sales using a real-lined 52 week 2020-3 period for comparability.

Kathy Smith: Comparable sales increased 1.9% with positive comps in both banners and particular strength in digital channels. And GMV increased 3.5% in the second quarter. Nordstrom banner net sales and comparable sales each increased 0.9% and GMV increased 1.1% in the second quarter. The timing shift of the anniversary sale had a positive impact on Nordstrom banner net sales of approximately 200 basis points. Nordstrom Rack net sales increased 8.8% with comparable sales increasing 4.1%. On a two-year stack basis, we are pleased to see the quarter-over-quarter sales increases.

As we have shared previously, growing the digital customer journey is a key part of our strategy to drive Nordstrom banner growth. During the second quarter solid sales growth at nordstrom.com was driven by an increased in our assortment across a balance of price points, improvements to search and discover as well as high in-stock rates of our fastest turning items. In April, we successfully launched our marketplace and have since added over 15,000 items to our digital offering and nearly a hundred new brands. While we're pleased with the initial response from our customers, marketplace is not yet a material driver and we will continue to scale it in the months ahead.

Erik Nordstrom: Turning to profitability, we expect a full-year event margin in the range of 3.6 to 4%.

In the second quarter solid sales growth at nordstrom.com was driven by an increased in our assortment across a balance of price points, improvements to search and discover as well as high in-stock rates of our fastest turning items. In April, we successfully launched our marketplace and have since added over 15,000 items to our digital offering and nearly a hundred new brands. While we're pleased with the initial response from our customers, marketplace is not yet a material driver and we will continue to scale it in the months ahead.

Erik Nordstrom: We continue to expect our effective tax rate to be approximately 27% for the full year.

Erik Nordstrom: From an earnings per share perspective, we now expect full your results in the range of $1.75 to $2.5, excluding the impact of any sharing purchases.

Erik Nordstrom: Another note regarding expected reported results.

Erik Nordstrom: During the second quarter, we made this strategic decision to change how we store in access data. This transformational change will enable us to improve data access and analysis capabilities and enhance our ability to leverage generative AI solutions and services at a faster pace.

Erik Nordstrom: We expect to complete this change by the end of the year, and as a result, plan to accelerate the depreciation of the IT assets that we will stop using.

Kathy Smith: Digital sales grew by 6.2% in Q2 representing the fifth consecutive quarter of sequential improvement. The timing shift of the anniversary sale had a positive impact on digital sales of approximately 100 basis points. Digital sales represented 37% of total sales during the quarter. Gross profit as a percentage of net sales expanded 155 basis points to 36.6% on strong regular price sales, leverage on higher sales and slight improvements in shrink. Ending inventory increased 8.3% versus a year ago.

Erik Nordstrom: This is expected to result in charges approximating 10 basis points to our reported SGMA expense as a percentage of net sales in Q3 as well as Q4.

Erik Nordstrom: Our Capital Allocation Priorities remain unchanged. We'll invest in the business to better serve our customers with high ROI projects, reduce our leverage and return cash to shareholders.

Erik Nordstrom: Last week, our Board of Directors declared a quarterly cash dividend of 19 cents per share.

Erik Nordstrom: In closing, we are encouraged that our focus and priorities are resonating with customers, driving top-line strength and expanding margins.

Erik Nordstrom: I continue to look forward to the progress that we'll make this year with the growth opportunities we have, both in the Nordstrom banner and the rack. We thank you for your interest in Nordstrom and with that Jamie, we are ready for questions.

Jamie Duies: Thank you, Catherine. Before we get started with Q&A, we will ask participants, please limit themselves to one question and one follow-up.

Kathy Smith: As Pete said, while the quality of inventory is good and largely supporting the Rack momentum, we aim to bring the inventory growth more in line with sales demand. SG&A expenses as a percentage of net sales increased 160 basis points to 34.4%. Largely due to the supply chain asset impairment charge that Erik discussed, when excluding the $54 million charge, SG&A expenses increased 20 basis points to 33%. As last year's second quarter results included a gain on sale of a real estate asset.

Speaker Change: will now move to the Q&A session.

Jamie Duies: Thank you.

Speaker Change: Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephones. Keep ahead, under confirmation, tell more indicate your lines in the question queue.

Speaker Change: You may press star 2 if you would like to remove your question from the queue.

Speaker Change: for part of Spence using speaker equipment and maybe necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment please, or I'd talk for questions.

Speaker Change: and the first question comes from the line of Dana Telsi with Telsi Advisory Group. Please proceed.

Dana Telsi: Hi, good afternoon, everyone.

Dana Telsi: As you went through the anniversary sale, any cadence to the anniversary sale that you saw that gives an indicator of consumer health to the balance of the year and also with your private brand launch versus the brands and the good reception on Women's Wear.

Kathy Smith: Our EBIT margin expanded by 115 basis points to 6.4% in the second quarter. Income tax expense of $42 million or 25.7% of pre-tax earnings was higher than the 17.2% recorded in the year ago quarter. Last year's second quarter income tax benefited from the favorable resolution of certain tax matters. Second quarter earnings per share of $0.96 is favorable to last year's $0.84, largely driven by the expansion of our gross margin and to a lesser extent expense management. We ended the second quarter with $1.5 billion in available liquidity including over $650 million in cash. Our balance sheet and financial position remain solid.

Dana Telsi: How are you thinking about the women's category overall, and then just lastly, on credit Cathy, the debt levels and what you're seeing there, how did that differ from the first quarter and how are you planning to the balance of the year? Thank you.

my day: My day and it's me, with regards to anniversary and we were essentially on plan, I think, you know, there's really nothing they're wrong to do to the case specifically, but we do have one thing that's great about the sales, we get an early read.

Speaker Change: on fall categories, because they do know the sales at-

Speaker Change: You product in there, and so getting marked up, and we had good performance.

Speaker Change: and both Outer-Words sweaters. We're talking about both well for the fall for us, thank you.

Speaker Change: You know, we over the years that it's become a bit of a balance on people buying, you know, with a dispation of fall, those who buy now learn out. So we're always trying to find that balance on. I don't think they have any.

This progress along with our results provide us with confidence in our full year guidance

And with that, I'll turn it over to Pete.

Speaker Change: Super impactful information for you about how it's going to relate to future sales, but we were happy with how Anniversary went. With regards to Frank Brands, we've had strike really across all categories which is super encouraging because as you know,

Speaker Change: We're talking about for a while that we have a lot of Andrew and there to grow that business.

Kathy Smith: Before moving to our outlook, I'd like to offer some additional commentary on our second quarter results. First, our efforts to improve the customer experience are taking hold as evidenced by the strength of our top line. In the second quarter, we grew our customer count, recorded an increase in customer trips and expanded margins. Second, our credit card revenues as a percent of total revenue declined modestly versus Q2 of last year. The decline was driven by higher losses, partially offset by higher balances and yield on the portfolio. This was consistent with our expectations, continuing the general trend over the last few years as the consumer has faced increased budgetary pressures.

Speaker Change: But the most important part is when we have success in women's apparel because it's such a big category and we add a lot of success in women's apparel.

Speaker Change: and the anniversary sale and private brands, so again, that gives a lot of confidence going forward. And good afternoon, Dana. I'll take the last two parts of your question.

We have learned about generations of shoppers that make the sale an annual family event, planning their summer activities around it.

Speaker Change: with regard to customer insights possibly, we thought of good growth across all income cohorts at the rack and then at Nordstrom stores or higher income consumers or customers, we thought of spending improve the most out of that in that manner.

This year we had great participation in the anniversary sale, especially by our most loyal customers with 75% of our Icon and Ambassador Nordic Club members shopping the sale. Anniversary Sales were driven by newness and fall fashion from the brands that matter most to our customers, including our Nordstrom private brands. Growth in Beauty Sales provided support to anniversary success and the active category which includes shoes and apparel continued to show strength throughout the event, registering double-digit growth.

Speaker Change: And then on credit losses, we shared early in the year that we expect to see losses take up modest way this year that I think can sit down with the industries that's seeing, and that's no different, but it's within our plan and our guidance.

Speaker Change: So nothing that's unforeseen there, but we are seeing credit losses take up a little bit.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Oliver Chang with TV Cowan, please proceed.

Kathy Smith: Turning to our outlook for the year, while we are pleased with our first half results, the external environment remains uncertain. When considering the puts and takes and appreciating that there is still a lot of this fiscal year left, we believe it is prudent to be appropriately cautious with our outlook. We are updating our guidance for the year slightly. Our updated guidance includes full year revenue in the range of a decline of 1% to an increase of 1%, which includes a headwind of approximately 135 basis points from the 53rd week in 2023's results.

Oliver Chang: Hi, Erik, Peter and Kathy, you had strong regular price sales on the gross margin, which was quite nice. How did that triangulate with the inventory position that you're in now, which...

Oliver Chang: which part of the inventory might you be a little bit over a inventory and you mentioned operational optimization, just with love details on that headline.

Customers are finding that the merchandise is high quality and offers a great combination of value and style. Although we still have a way to go, we're encouraged by the progress our private brands are making.

Speaker Change: Rack continues to see great progress as well. It's a difficult business and not the inventory flows are so important. Do you see continued positive comps and great moments in there? Are you in the right place for where you want to be there? Thank you.

Our anniversary sale provides us with a special opportunity to engage our customers and one way we do so is through in store and online events. We strive to make our Nordstrom stores not only a compelling place to shop, but an interesting fun and engaging environment. This year our teams rolled out new events and offers to serve and engage customers which drove incremental purchase trips throughout the sale. From refreshed and expanded private shopping events to trunk shows featuring notable brands, our teams hosted over 900 in store events roughly 20% more than last year with nearly 500 of those events exclusive to our Nordic Club members. Customers responded positively as event attendance tripled compared to last year.

This year our teams rolled out new events and offers to serve and engage customers which drove incremental purchase trips throughout the sale. From refreshed and expanded private shopping events to trunk shows featuring notable brands, our teams hosted over 900 in store events roughly 20% more than last year with nearly 500 of those events exclusive to our Nordic Club members. Customers responded positively as event attendance tripled compared to last year.

Albert: Albert's Pete, with our inventory levels, yes, it's Kathy mentioned in terms of the quality of what those are. I think that's probably the most important point. We were a little over in that inventory.

Albert: Group Faction of Sales, but if you look at where it is and what the content of inventory is, that helps.

Kathy Smith: We continue to expect revenue to follow a typical quarterly cadence. As a reminder, the timing shift of our anniversary sale with one day falling in the third quarter this year versus eight days in 2023, is expected to have a negative impact of approximately 100 basis points in our third quarter net sales this year. We now expect the total company comparable sales in a range of flat to an increase of 2% in 2024 versus 52 weeks in 2023. As our Fiscal 2023 included a 53rd week, we calculate our 2024 comparable sales using a realigned 52-week 2023 period for comparability.

Speaker Change: I think bring some clarity. So, most of that really showed up in the rack business and to your point that we have this rack momentum. I think particularly with the new stores, we're opening and then the rack.com, that's really solid. If you were to look at where we have.

We continue to focus on growing our New York City store. For all the obvious reasons, our New York flagship store is important to us. Year-to-date it is the top sale store in our fleet and amongst our fastest growing. In advance of our anniversary sale, we open our first ever Icon Lounge in that store. It is a place where our highest tier Nordic club members can enjoy a private lounge experience complete with complimentary food and drink, as well as dedicated services to enhance their in-store shopping experience.

Speaker Change: The quantities that are over last year, it's largely there and I think that's pretty good sign. Also, what you would see in terms of being able to

Speaker Change: Forecasts, how this impacts our public report is, you look at aging primarily in our aging. It's really good across both banners with rack and northstrom. So I think we feel pretty good about it.

Speaker Change: Obviously we pay really close attention to inventory levels and we want to bring it down some, but we're not particularly concerned and certainly doesn't.

Kathy Smith: As our Fiscal 2023 included a 53rd week, we calculate our 2024 comparable sales using a realigned 52-week 2023 period for comparability. Turning to profitability, we expect a full year event margin in the range of 3.6 to 4%. We continue to expect our effective tax rate to be approximately 27% for the full year. From an earnings per share perspective, we now expect full year results in the range of $1.75 to $2.5 license, excluding the impact of any sharey purchases. Another note regarding expected reported results.

Erik Nordstrom: Creating the overhang for us that were anticipating for the second half. And overall pick up on operational optimization and then throw it to Erik on the rack.

Erik Nordstrom: On Operation Optimization, it's been, as you know, a priori of ours all year and will continue to focus on it. Our team makes is making really good progress. And I think you hit on the one that's really encouraging, which is that consistent little merchandise is so important.

In the Nordstrom banner, well known brands such as Vince, Cinq à Sept, and Free People were strong. At the Rack, a key driver of the growth is a high degree of overlap with the brands customers find at our Nordstrom stores. We continue to focus the Rack selection on these brands, which drove notable growth in women's apparel for the rack in the second quarter.

Erik Nordstrom: to continue that threat of newness for our customers in both banners. It helps to drive those regular price sales and we saw the increase of regular price sales again this quarter, which is great. But underneath that we're seeing as a process inbound merchandise faster, which it gets as an return faster, which enables that freshness too, and again a better customer experience.

The beauty category continued to be a top performer for us at both banners. Its second quarter sales growth was supported by the strength of fragrances and hair care essentials throughout the anniversary sale. The kids category sustained its momentum in Q2 as well. Baby gear has been a solid contributor to growth and has become a more sizable business for us. The growth is a direct reflection of customer interest in this type of product as we've leaned into car seats and strollers with great brands like Nuna. Overall, customers responded well to our curated assortment which helped to drive an increase in regular price sales and margin expansion in the second quarter.

Erik Nordstrom: and RFID, we continue to roll it out across our fleet, but more importantly, as we're now starting to get the benefits that that insight can give us. And again, it enhances the customer experience as we're able to fill their orders.

Kathy Smith: During the second quarter, we made this strategic decision to change how we store and access data. This transformational change will enable us to improve data access and analysis capabilities and enhance our ability to leverage generative AI solutions and services at a faster pace. We expect to complete this change by the end of the year, and as a result, plan to accelerate the depreciation of the IT assets that we will stop using. This is expected to result in charges approximating 10 basis points to our reported S-GNA expense as a percentage of net sales in Q3 as well as Q4.

Erik Nordstrom: And then lastly, we'll continue to look to leverage our existing spiking network, always balancing the best customer experience in the campus feeding costs. So just a progress across the board.

Erik Nordstrom: Hello, brothers, Erik, on rack. Yeah, we've been so good about our results, our teams, executing well on the plan. Rack is, of course, the local porous.

Speaker Change: and that's new stores, we continue to see opportunities to add new stores at the pace we're currently adding and certainly the comp store of business with one of our digital business. You mentioned Flow.

Speaker Change: Alright, yeah.

Speaker Change: of Consumers Counter-Rack, Dick Klein.

Speaker Change: A constant flow of newness from the brand that they associate with us. So I think that some great brand degree prices continues to serve us well. And we feel really great about that. The digital piece.

Kathy Smith: Our capital allocation priorities remain unchanged. We'll invest in the business to better serve our customers with high ROI projects, reduce our leverage and return cash to shareholders. Last week, our Board of Directors declared a quarterly cash dividend of $0.19 per share. In closing, we are encouraged that our focus and priorities are residing with customers driving top line strength and expanding margins. I continue to look forward to the progress that we'll make this year with the growth opportunities we have both in the Nordstrom banner and the Rack.

And with that, I'll turn it over to Cathy to discuss our financial results and outlook.

Speaker Change: It is a point of differentiation. There's not many online off-priced retailers out there. It works for us because it's part of our ecosystem.

Catherine R. Smith: Thanks, Pete. And thank you all for joining us today. I'll begin by covering our second quarter results, then discuss our outlook and close with our capital allocation priorities. In the second quarter, we delivered solid results with growth in net sales and EBIT as well as margin expansion. Total company net sales increased 3.4% in the second quarter driven by strength in both banners. The timing shift of the anniversary sale with one day falling in the third quarter this year versus eight days last year benefited net sales by approximately 100 basis points.

Speaker Change: And we see more opportunities there that leverage on the capabilities to engage with customers more and get a better shirt and a wallet. So, we're delivering our plans and...

Speaker Change: have plans going forward to continue that growth.

Speaker Change: Very helpful. That's regards. Thank you.

Speaker Change: Episode 2

Speaker Change: and the next question, welcome from the line of Stemien's figure with BML Capital Markets. Please proceed.

Stemien's figure: Thanks, Catherine and everyone, hope you all have a nice summer.

James Duies: We thank you for your interest in Nordstrom. And with that, Jamie, we are ready for questions. Thank you, Kathy. Before we get started with Q&A, we will ask participants, please limit themselves to one question and one follow-up.

Stemien's figure: Cathy, what's the margin, in fact, from the anniversary sale timing shift in 2Q? You guys a nice cross margin called us showing full price sales.

Speaker Change: So just curious about how to think about anniversary sale gross margins versus the non-sale and just that impact of the timing shift of to margins on top of the revenue that you mentioned and then just appreciating, appreciate the accelerated depreciation commentary that you gave us for the tech that you're not going to be using anymore any cost we should be thinking about for the new approach to storing data.

Operator: We'll now move to the Q&A session. Thank you. Ladies and gentlemen, if you would like to ask a question, please press start one on your telephone keypad and the confirmation tunnel indicate your lines in the question queue. You may press start two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the button. Matthews, one moment please, we'll have both the questions.

Speaker Change: ahead. Thank you.

Chris Martin: Yeah, thank you. Good afternoon, Samian. So, Chris Martin, smiling on your comment-around impact anniversary sale and peach of way in here too, but the great news is our team does a good job of negotiating with our vendors and we get good goods.

Speaker Change: New Virgin Dice for our customers, so I would have called out a specific margin impact specifically for anniversary, and we also noted strong ring price sales. So I think in into a, with a necessarily called A.D. special out for anniversary impact on margin. We did share in the prepare remarks, rate price sales of just more volume, which helps on margin on that gross margin. Is it year or year you're seeing an inflat improvement in shrink, all of those favorably impacting our gross margin?

Dana Telsey: And the first question comes from the line of Dana Telsey, with Telsey Advisory Group. Please proceed. Hi, good afternoon, everyone. As you went through the anniversary sale, any cadence to the anniversary sale that you saw that gives an indicator of consumer health for the balance of the year. And also with your private brand launch versus the brands and the good reception on women's wear. How are you thinking about the women's category overall?

Speaker Change: and then I'll answer on tech and then if Pete wants anything more on adversaries, specifically to margins.

Speaker Change: On the technology, no, I would say generally we'll always think about total technology spend within a budget or at a level that we're wanting to afford. So we'll fit our expenses inside that envelope going forward. The specific call I was to help with a little bit of a deep...

Dana Telsey: And then just lastly on credit, Cathy, the debt levels and what you're seeing there. How did that differ from the first quarter and how you're planning for the balance of the year? Thank you. I think it's been with regards to anniversary and we were essentially on plan. I think there's really nothing there relative to the cable specifically, but we do have one thing that's great about the sales we get an early read on fall categories, because then you know the sales as you product in there and looking marked up and we had different performance in both outerwear and sweaters, which I think both well for the fall for us.

Speaker Change: Reporting guidance we're giving so that you can see there's been a small impact in the next headquarters.

Speaker Change: You have this page just real quickly on the internet anniversary thing if you're looking for how that impacts margin as a lot more to it going forward than it does with looking backwards.

Speaker Change: If we sell through court and plan, then we don't have any kind of overhang that creates markdowns if we don't and attention that does. As I mentioned, we were just right about on plan there, so with our self-ruse and self.

Speaker Change: I think we feel good about how that impacts our march and profitability going forward.

Speaker Change: That's really great. Maybe just quickly follow up on that. What would the gross, really expected gross margin trajectory built into the full year, even guidance? So should we think about that?

Dana Telsey: But, over the years that it's become a bit of a balance on people buying with anticipation of fall those who buy an outwear now. So, we're always trying to find that balance. I don't think they have any super impactful information for you about how it's going to relate to future sales. But we were happy with how anniversary went. With regards to private brands, we've had strength really across all categories, which is super encouraging because as you know, we've been talking about for a while that we have a lot of headroom there to grow that business.

Speaker Change: James, between Tuesday and June 4, but all in for the full year, taking in the first half will see a small amount of large expansion in gross margin for the year.

Speaker Change: Great, thanks so much guys, that's luck for the rest of the year.

Speaker Change: Thank you.

Speaker Change: and the next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed.

Lorraine Hutchinson: Thank you for that afternoon. I wanted to follow up on the rack roll-out. Let's go to pay back on a typical new rack store, have the new stores, but hitting your plan. And what's the runway for the number of racks you expect to open over time?

Erik Alcard: and Erik Alcard, and Captain Cheyman, if she has some more color.

Dana Telsey: But the most important part is when we have success in women's apparel, because it's such a big category and we had a lot of success in women's apparel. The anniversary sale and private brands. So again, that gives us a lot of confidence going forward.

Speaker Change: We've opened a lot of racks for more than our return investment is pretty darn consistent. We get mid to high teams, and again, we see lots of opportunities to continue to add stores there.

Speaker Change: We shared in the program March 2, we've opened 11 due to date when we intend to open 12 March this year, so that's 23. That's pretty consistent with last year, so it seems reasonable that we would expect it to be in the same range going forward next year.

Catherine R. Smith: Good afternoon, Dana. I'll take the last two parts of your question with regards to customer insights possibly. We saw good growth across all income cohorts at the Rack. And then at Nordstrom stores are hiring some consumers or customers, we saw spending improved the most out of that in that manner. And then on credit losses, we shared early in the year that we expect to see losses take up modestly this year. That's, I think, consistent with what the industry's been seeing and that's no different. But it's within our plan and our guidance. So, nothing that's unforeseen there, but we are seeing credit losses take up a little bit. 

Speaker Change: Thank you.

Speaker Change: Episode 2

Alex Strutton: and then that special comes from the line of Alex Strutton with Morgan Stanley, please go see.

Alex Strutton: Perfect, thanks a lot for taking the questions just on to follow up on the inventory question. I think you said that Iraq was where some of that excess was concentrated.

Speaker Change: Was that intentional, like I built in the holiday or if you can just give us some more color there.

Speaker Change: and then just on the full-year guide ends, giving you beat the second quarter EPS by a lot, but you're only increasing the full year by a little. Does that mean you have a worse back-ass outlook than you did three months ago, or how should I contextualize that? Thanks a lot.

Operator: And the next question comes from the line of Oliver Chen with TD Cowan. Please, proceed.

As our Fiscal 2023 included a 53rd week, we calculate our 2024 comparable sales using a realigned 52-week 2023 period for comparability.

Speaker Change: Yes, Peter, I'll start with the rack in the toilet level, say?

Oliver Chen: Hi, Erik, Pete, and Cathy. You had strong regular price sales on the gross margin, which was quite nice. How did that triangulate with the inventory position that you're in now? Which part to the inventory might you be a little bit over inventoried? And you mentioned operational optimization, just would love details on that headline. Rack continues to see great progress as well. It's a difficult business in that the inventory flows are so important. Do you see continued positive comps and great momentum there? Are you in the right place for where you want to be there? Thank you.

Speaker Change: I don't want to overstate this. I mean, we're slightly over there and as you mentioned it, it really is concentrated both in the rack. I think both of that.

Turning to profitability, we expect a full year EBIT margin in the range of 3.6% to 4%. We continue to expect our effective tax rate to be approximately 27% for the full year. From an earnings per share perspective, we now expect full year results in the range of $1.75 to $2.05, excluding the impact of any share repurchases. Another note regarding expected reported results.

Turning to profitability, we expect a full year EBIT margin in the range of 3.6% to 4%. We continue to expect our effective tax rate to be approximately 27% for the full year. From an earnings per share perspective, we now expect full year results in the range of $1.75 to $2.05, excluding the impact of any share repurchases.

Speaker Change: For some timing issues when you're receiving inventory like this, you know, we want the opportunistic about that. Sometimes we have the opportunity to buy something and bring it in in anticipation of stores okay. So I think when you look at it in a month by month way, that doesn't really paint the whole picture so.

Speaker Change: We're always concerned about inventory levels and, you know, we appreciate being lame, but we're not particularly concerned about being a little bit over in this moment.

Another note regarding expected reported results. During the second quarter, we made this strategic decision to change how we store and access data. This transformational change will enable us to improve data access and analysis capabilities and enhance our ability to leverage generative AI solutions and services at a faster pace. We expect to complete this change by the end of the year, and as a result, plan to accelerate the depreciation of the IT assets that we will stop using. This is expected to result in charges approximating 10 basis points to our reported SG&A expense as a percentage of net sales in Q3 as well as Q4.

Pete Nordstrom: Do you see continued positive comps and great moments in there? Are you in the right place for where you want to be there? Thank you. Oliver's Pete, with our inventory levels, yes, it's Kathy mentioned in terms of the quality what those are. I think that's probably the most important point. We were a little over in that the inventory grew faster in the sales, but if you look at where it is and what the content of inventory is, that helps, I think, bring some clarity.

Speaker Change: Particularly given the fact that we've got the positive momentum to our comp, track stores. We have new records coming on and the Rack.com businesses are going to.

Speaker Change: And I'll look, I'll take the guidance question, so appreciate your question. We are encouraged, obviously, by the performance to the first half, we're really pleased to see the continued strength on the top lines at those banners. But the environment does remain a certain end, we've got a really big part of the back half of the year, as with all retailers.

Speaker Change: You know, two thirds of our profits typically come in the second half and we're just being thoughtful over all that. So we're being prudent and hopefully a little appropriately cautious with our outlook and we'll see how the next two quarters play out.

Our capital allocation priorities remain unchanged. We'll invest in the business to better serve our customers with high ROI projects, reduce our leverage and return cash to shareholders. Last week, our Board of Directors declared a quarterly cash dividend of $0.19 per share.

Pete Nordstrom: So, most of that really should have been the Rack business, and to your point, that we have this Rack momentum, I think, particularly, the news stores we're opening and then the rack.com business that's really solid. If you look at where we have the quantities that are over last year, it's largely there. And I think that's pretty good sign. Also, what you would see in terms of being able to forecast how this impacts our probability going forward, is you look at aging primarily and our aging is really good across both banners with Rack and Nordstrom.

Speaker Change: Thanks for all your love.

In closing, we are encouraged that our focus and priorities are residing with customers driving top line strength and expanding margins. I continue to look forward to the progress that we'll make this year with the growth opportunities we have both in the Nordstrom banner and the Rack. We thank you for your interest in Nordstrom.

Speaker Change: and the next question comes from the line of Chuck Graham with Gordon Paskett. Please proceed.

Chuck Graham: Hey, thanks for much congrats on the success at the rack here's the traffic ticket composition of the 4.1% comp, how the comp phase throughout the quarter and any thoughts on the first few weeks of a longer specifically at the rack.

We thank you for your interest in Nordstrom.

And with that, Jamie, we are ready for questions. Thank you, Kathy. Before we get started with Q&A, we will ask participants, please limit themselves to one question and one follow-up.

And with that, Jamie, we are ready for questions.

James Duies: Thank you, Cathy. Before we get started with Q&A, we will ask participants, please limit themselves to one question and one follow-up. We'll now move to the Q&A session.

Speaker Change: Episode 2.

Speaker Change: Yeah, I'm happy to start. So throughout the quarter, I wouldn't say there was any specific pattern for the rock in particular.

We'll now move to the Q&A session.

Operator: [Operator Instructions] And the first question comes from the line of Dana Telsey, with Telsey Advisory Group. Please, proceed.

Speaker Change: You know, the quarter generally played out, stronger toward the end in July, but I wouldn't have picked out any particular pattern there. And then, you know, total rack banter, 8.8% sales, compost, 401, new stores, or largely the difference we have. I think that's one or two small closures in there. But there's not that that's pretty much what's making up the balance of it.

Pete Nordstrom: So, I think we feel pretty good about it. Obviously, we pay really close attention to inventory levels, and we want to bring it down some, but we're not particularly concerned. And certainly, it doesn't create any overhang for us that we're anticipating for the second half.

And the first question comes from the line of Dana Telsey, with Telsey Advisory Group. Please proceed.

Speaker Change: Okay, just anything on traffic and ticket composition.

Dana Telsey: Hi, good afternoon, everyone. As you went through the Anniversary Sale, any cadence to the Anniversary Sale that you saw that gives an indicator of consumer health for the balance of the year? And also with your private brand launch versus the brands and the good reception on women's wear. How are you thinking about the women's category overall? And then just lastly on credit, Cathy, the debt levels and what you're seeing there. How did that differ from the first quarter and how you're planning for the balance of the year? Thank you.

Catherine R. Smith: And Oliver, I'll pick up on operational optimization and then throw it to Erik on the Rack. On operational optimization, it's been, as you know, a priority of ours all year and we'll continue to focus on it. Our team is making really good progress. And I think you hit on the one that's really encouraging, which is that consistent flow of merchandise is so important to continue that thread of newness for our customers in both banners.

Speaker Change: Graphic was strong across the digital channels in particular, it's what I would have said.

Speaker Change: So the stores channels were built on a compound basis, fairly flat, useor, obviously strong. And then the digital was a particular standout in both Fanners for us.

And then just lastly on credit, Cathy, the debt levels and what you're seeing there. How did that differ from the first quarter and how you're planning for the balance of the year? Thank you.

Speaker Change: Okay, great. Thanks. And then like all this is the gross margin, 36.6. It's not your best ever. It's probably one of your best quarters ever. I'm curious the impact across the two banners on that success. You know, how much is being driven by the rack in particular and I guess the sustainability of that 36.6.

Pete Nordstrom: It helps to drive those regular price sales, and we saw the increase in regular price sales. Again, that's quarter, which is great. But underneath that, we're seeing a process inbound merchandise faster, which gets us, and returns faster, which enables that freshness too, and again, a better customer experience. And RFID, we continue to roll it out across our fleet, but more importantly, we're now starting to get the benefits that that insight gets us.

Peter E. Nordstrom: Hi, Dana, it's Pete. With regards to anniversary and we were essentially on plan. I think there's really nothing there relative to the cadence specifically, but we do have--one thing that's great about the sales we get an early read on fall categories. Because as you know, the sales has new product in there that ends up getting marked up. And we had good performance in both outerwear and sweaters, which I think bodes well for the fall for us.

Speaker Change: Going forward, it sounds like you're guiding to a little bit of compression relative to that number in the back half, but just any color there would be helpful. Thanks.

Speaker Change: Yeah, we don't typically break out the panels for the panels just yet. Maybe we'll get there eventually.

Speaker Change: So, in total to your point, though, we're pleased with the Grossmarge expansion over 100 to divide or about 150 by basis points, your year, strong rate by sales, that's in both banners that come as definitely both banners, leveraging the volume, continuing. And in the shrink comments, the improvement off those are historical highs on shrink, just both banners as well. So those are our comments for both. To your point, I think it is at least in recent history, a high that we're seeing. So definitely, you know, good, good progress there. But as we provided in our guidance, we're, we're cautiously planning for the back half of the year.

Pete Nordstrom: And again, it enhances the customer experience as we're able to fill their orders. And then lastly, we'll continue to look to leverage our existing supply chain network, always, you know, balancing the best customer experience we can with speed and cost.

Erik Nordstrom: So just to progress across the board. Oliver, is there on rack? Yeah, we feel good about our results. Our team's actually keeping well on the plan. Rack is, of course, the road vehicle for us. And that's new stores. We continue to see opportunities to add new stores at the pace we're currently adding. And certainly the comp store business, more of our digital business. You know, you mentioned flow. Yeah, customers come to rack to find a constant flow of newness from the brand that they associate with us.

Speaker Change: and then the next question comes from the line of Blake Anderson with Jefferies, please proceed.

Blake Anderson: All right, thanks for taking our question, wanting to ask on...

Speaker Change: On designer in particular, how's the performance there during the quarter? Then can you comment on kind of the full price stealthy or you're seeing in that category? And then how is that inventory position for the back half? I know you mentioned most of the increase, but rack, but just curious.

Speaker Change: Haldesigner was fairing, as well, and they just wanted to ask a Nordstrom banner more broadly. I think you guys mentioned a few...

Erik Nordstrom: So, focus on great brands at great prices continues to serve us well. And we feel really great about that. The digital piece, it is a point of differentiation. There's not many online off-priced retailers out there. It works for us because it's part of our bigger ecosystem. And we see more opportunities there to leverage on the capabilities to engage with customers more and get a bigger share of their wallet. So, we're delivering on our plans and we have plans going forward to continue that for us. Very helpful bet for guards.

Speaker Change: Initiative, such as broadening assortment and price points. Was wondering if you could comment a little bit more on what you did there? That'd be great. Thanks so much.

Speaker Change: with the design arm and feel like it's been kind of a consistent theme here for a while and certainly you're seeing it with other retailers in that space as well.

Smith: Smith challenging.

Speaker Change: You know, there was a lot of growth for a couple of years and now it's just, we've been articulating that's kind of right-sized and so

Erik Nordstrom: So we're delivering our plans and We have plans going forward to continue that for us. Very helpful bet for guards.

Speaker Change: and we're looking at 19 numbers, and we're pretty close to what 19 was.

Kathy Chitz: It's hard for us to predict if that is leveled out entirely or not, you know, it's Kathy Chitz, and I guess we'll see with the next couple of quarters brain. So we'll just try to put ourselves in an advantageous place with inventory level.

Operator: The next question will come from the line of Simeon Siegel with BMO Capital Markets. Please, proceed. Thanks.

Simeon Siegel: The next question will come from the line of Simeon Siegel with BMO capital markets. Please proceed. Thanks.

Do you see continued positive comps and great moments in there? Are you in the right place for where you want to be there? Thank you.

Simeon Avram Siegel: Thanks. Good afternoon, everyone. Hope you all had a nice summer. Cathy, what's the margin impact from the Anniversary Sale timing shift in Q2? You guys got a nice gross margin, called out strong full price sales. So, just curious about how to think about anniversary sale gross margins versus the non-sale and just that impact of the timing shift to margins on top of the revenue that you mentioned? And then just appreciating--appreciate the color and depreciation commentary to give us for the tech that you're not going to be using anymore. Any cost we should be thinking about for the new approach to storing data ahead? Thanks.

Kathy Chitz: You know, we're not caught in a tough spot. And our team worked really hard on that and we've had a lot of good collaboration with our vendor partners. So, not a lot to report other than it's still relatively challenging in that space.

Peter E. Nordstrom: Oliver, it's Pete. With our inventory levels, as Cathy mentioned in terms of the quality what those are, I think that's probably the most important point. We were a little over in that inventory grew faster in the sales, but if you look at where it is and what the content of inventory is, that helps, I think, bring some clarity.

Speaker Change: Yeah, there's an American banner, a couple days call on it, we sort of stores, it only starts across to our service and I think our team is a lot of the...

Speaker Change: Second way, we have to keep mentioned, we've done a lot of of that, just making our stores.

Speaker Change: Interesting places to come to that's particularly leveraging Nordic cloud or low-toe program. We've seen some good traction there. And last at call for stores, the merch mix there, I include the balance of price points.

Kathy Smith: Thanks. Yeah, thank you. Good afternoon, Simeon. So gross margin, I'm smiling on your comment around impact anniversary sale and peach of way in here too. But the great news is our team does a good job of negotiating with our with our vendors and we get good new merchandise for our customers. So I would have called out a specific margin impact specifically for anniversary. And we also noted strong rig price sales. So I think in in total I would have necessarily called anything special out for anniversary impact on margin.

Speaker Change: You know, we have a broad offer and we need to manage that well to have everything from Amsterdam, Valentino, and James, I could jump about and also...

Speaker Change: Really being having authority around our best brands, it's sure we're going to start with them.

Speaker Change: and the digital business here we...

Speaker Change: I think it's a tough invention, we have a strong digital purpose.

Speaker Change: Over the quarter, some of it's...

Speaker Change: Again, I introduce the execution and enhancements to search and discoveries been helpful about balance of price points is particularly important on line and we have a real strong focus on in stock rates of our fastest turning items.

It helps to drive those regular price sales, and we saw the increase in regular price sales. Again, that's quarter, which is great. But underneath that, we're seeing a process inbound merchandise faster, which gets us, and returns faster, which enables that freshness too, and again, a better customer experience.

Kathy Smith: We did share in the prepared remarks, rig price sales up, just more volume which helps on margin on that gross margin. So, that's a bit year-over-year you're seeing. And then slight improvement in shrink all of those, favorably impacting our gross margin. And then I'll answer on tech and then if Pete wants anything more on anniversary specifically to margin on the technology. No, I would take generally will always think about total technology spend within a budget or a level that we're wanting to afford.

Speaker Change: That was a big part of this.

Speaker Change: Choice Council, we've important to update out a little more at rack.com and version.com.

Speaker Change: and then lastly, as you mentioned, we did launch our marketplace early this year. It's still small, but the feedback, one of the numbers have been all ahead of our plan.

And RFID, we continue to roll it out across our fleet, but more importantly, we're now starting to get the benefits that, that insight gives us. And again, it enhances the customer experience as we're able to fill their orders. And then lastly, we'll continue to look to leverage our existing supply chain network, always, balancing the best customer experience we can with speed and cost. So, just good progress across the board.

Speaker Change: While not material yet, it's all same purging and more qualitatively, we've got good feedback from our vendors on that, so we feel like we're on track with a bucket please.

Speaker Change: That's very helpful. Thanks so much.

So just to progress across the board.

Speaker Change: and the next question will come from the line of Dylan Cardin with William Blair. Please proceed.

Erik Nordstrom: Oliver, this is Erik. On Rack, we feel good about our results. Our team's actually keeping well on the plan. Rack is, of course, the road vehicle for us. And that's new stores. We continue to see opportunities to add new stores at the pace we're currently adding. And certainly the comp store business, more of our digital business. You know, you mentioned flow. Yeah, customers come to Rack to find a constant flow of newness from the brand that they associate with us.

Kathy Smith: So we'll fit our expenses inside that envelope going forward. The specific call out was to help with a little bit of a reporting guidance for giving. So you can see there's going to be a small impact in the next two quarters. Yeah, the state just real quickly on the anniversary thing. If you're looking for how that impacts margin has a lot more to is going forward than it does with looking backwards.

Dylan Cardin: I really appreciate it. Just curious on rack, particularly as it relates to guidance. Do you feel like you have the inventory?

Speaker Change: and that banner from a price point standpoint and just sort of access and availability and flow and a place where that could be a continued source of upside or at the very least kind of comping more in line.

Speaker Change: with sort of the peer set there.

Catherine: Go forward, back, Catherine.

Catherine: We're definitely on the right track there. You've heard us talk about great brands, great prices, and what makes our offer different, the off price space is access to some of these premium brands that we carry in the Nordstrom banner.

Kathy Smith: If we sell through court to plan, then you know, we don't have any kind of overhang that creates markdowns if we don't and the tension that does. As I mentioned, we were just right about on plan. There's so with our sell throughs and so. I think we feel good about how that impacts our markets and profit will be going forward. That's really great.

So, focus on great brands at great prices continues to serve us well. And we feel really great about that. The digital piece, it is a point of differentiation. There's not many online off-priced retailers out there. It works for us because it's part of our bigger ecosystem. And we see more opportunities there to leverage on the capabilities to engage with customers more and get a bigger share of their wallet. So, we're delivering on our plans and we have plans going forward to continue that for us.

Catherine: And the more we lead into that, the better we do. We've got a lot of confidence around the poor point of that strategy.

Speaker Change: Art teams are well-connected to the opportunities to build a procure that merchandise and so at least so far we've seen no reason to believe we can't keep going even as we had new stores there.

Speaker Change: There's a good opportunity for us to buy great merchandise out there and we pursue that every day.

Kathy Smith: Maybe just quickly follow up on that then. What would the grossly expected gross margin trajectory built into the full year even guidance? How should we think about that? Yeah, I can help there. So what's included in our full year guidance? A little bit of change between Q3 and Q4, but all in for the full year taking in the first half. We'll see a small amount of margin expansion in gross margin for the year. Great. Thanks so much guys. That's luck for the rest of the year. Thank you.

Speaker Change: and just on the beauty side of things you're calling that out is sort of a bright spot which kind of books the industry right now. Do you feel like you're doing a better job defending, sharing that channel? Is that just a comparison? How should we think about why you might be outside some of the broader trends in that space? Thanks.

Oliver Chen: Very helpful. Best regards. Thank you.

Speaker Change: Peter again, that's a great question.

Peter: I think relative to our offer, you know, the low single-digit growth without there, it's been solved and pretty good, that's your...

Peter: We're marking on there. It's the whole industry's done pretty well. So, marketers and important things that we look at. And I think it's important that we don't.

Lorraine Hutchinson: And the next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed. Thank you.

Peter: We get complacent because we've had pretty good this relative to the rest of our categories. We do pay a lot of attention, what's going on out there relative to market share and...

Erik Nordstrom: Good afternoon. I wanted to follow up on the rack roll out. What's the payback on a typical new rack store? Have the news stories been hitting your plan? And what's the runway for the number of racks you expect to open over time? Hey, Larry, does Eric all start and Kathy can shine in if she has some her color? You know, we've opened a lot of rack stores and our return on investment is pretty darn consistent.

Peter: We're always really looking for new and better ways to serve customers in that space and thinking about newness and innovation and with products. So yeah, I don't want to send a signal that we've got to all figure out there in the race and we know we can do better and it's competitive smart.

Thanks.

Catherine R. Smith: Yeah, thank you. Good afternoon, Simeon. So, gross margin, I'm smiling on your comment around impact anniversary sale, and Pete should weight in here too. But the great news is our team does a good job of negotiating with our vendors and we get good new merchandise for our customers. So, I wouldn't have called out a specific margin impact specifically for anniversary. And we also noted strong rate price sales. So, I think in total, I wouldn't have necessarily called anything special out for anniversary impact on margin.

Speaker Change: Thank you for sharing, that's where.

Speaker Change: and our last question will come from the line of Paul Leigh West with steady group. Please proceed.

Erik Nordstrom: We get mid to high teens RR. And again, we see lots of opportunity to continue to add stores there. And we shared in the prepare remarks to we've opened 11 few to date. We intend to open 12 more this year. So that's 23. That's pretty consistent with last year. So it seems reasonable that we would expect it to be in the same range going forward next year.

Speaker Change: I don't know if I missed it, but did you say what the performance was during the anniversary sale? It's numerically, how perform versus the business during the quarter?

We did share in the prepared remarks, rig price sales up, just more volume which helps on margin on that gross margin. So, that's a bit year-over-year you're seeing. And then slight improvement in shrink all of those, favorably impacting our gross margin.

Speaker Change: and second, curious that the scripts of the Cosmetics of the Cannon, was earning impact on growth margin and or inventory from that switch in the second quarter and then there's anything you should be thinking about in the third quarter related to that switch.

And then, I'll answer on tech and then if Pete wants to add anything more on anniversary specifically to margin. On the technology, no, I would say generally, we'll always think about total technology spend within a budget or a level that we're wanting to afford. So, we'll fit our expenses inside that envelope going forward. The specific call out was to help with a little bit of a reporting guidance we're giving. So you can see there's going to be a small impact in the next two quarters. Yeah, the state just real quickly on the anniversary thing. If you're looking for how that impacts margin has a lot more to is going forward than it does with looking backwards.

And then, I'll answer on tech and then if Pete wants to add anything more on anniversary specifically to margin. On the technology, no, I would say generally, we'll always think about total technology spend within a budget or a level that we're wanting to afford. So, we'll fit our expenses inside that envelope going forward. The specific call out was to help with a little bit of a reporting guidance we're giving. So you can see there's going to be a small impact in the next two quarters.

Speaker Change: Hi, Paul, take the coffee counting, and I think the first part of your question was just the performance of anniversary sale. If that's not it, and come back at us, and peek and finish the fair. On counting, no particular impact I would call out in the quarter, remembering when we talked about our full year guide at the beginning of the year. We said there's probably about 10 basis points that we were going to see this year, and then...

Peter E. Nordstrom: Yeah, this is Pete. Just real quickly on the anniversary thing. If you're looking for how that impacts margin has a lot more to do with going forward than it does with looking backwards. If we sell through according to plan, then we don't have any kind of overhang that creates markdowns if we don't, and potentially that does. As I mentioned, we were just right about on plan there with our sell-throughs. And so, I think we feel good about how that impacts our markets and profitability going forward.

Operator: And the next question comes from a line of Alex Straton with Morgan Stanley. Please, proceed.

Alex Strutton: And the next question comes from a line of Alex Strutton with Morgan Stanley. Please proceed. Perfect. Thanks a lot for taking the questions. Just on to follow up on the inventory question. I think you said that that rack was where some of that excess was concentrated. Was that intentional? Like I build into holiday or if you can just give us some more color there. And then just on the full year guidance given you beat the second quarter EPS by a lot, but you're only increasing the full year by a little. Does that mean you have a worse back half outlook than you did three months ago, or how should I contextualize that? Thanks a lot.

If we sell through court to plan, then you know, we don't have any kind of overhang that creates markdowns if we don't and the tension that does. As I mentioned, we were just right about on plan. There's so with our sell throughs and so. I think we feel good about how that impacts our markets and profit will be going forward.

Speaker Change: It's purely a timing impact as we move between periods, but from period period it's possible though I would say generally I would think of cost accounting as the moving cost accounting from retail as a driver of the performance. It really is just a timing conversation at times.

Simeon Avram Siegel: That's really great. Maybe just quickly a follow-up on that then. What do you expect the gross margin trajectory built into the full year even guidance? How should we think about that? Yeah, I can help there. So what's included in our full EBIT guidance? How should we think about that.

Maybe just quickly follow up on that then. What would the grossly expected gross margin trajectory built into the full year even guidance? How should we think about that? Yeah, I can help there. So what's included in our full year guidance?

Speaker Change: and Pete will finish up at their dating. I think your question was anniversary performance.

Pete Nordstrom: Yes, we have just, like, how we move it up or down, but this last year during the anniversary, still clear it.

Yes. I can help there. So, what's included in our full year guidance, little bit of change between Q3 and Q4, but all in for the full year, taking in the first half. We'll see a small amount of margin expansion in gross margin for the year. Great. Thanks so much guys. That's luck for the rest of the year. Thank you.

Yes. I can help there. So, what's included in our full year guidance, little bit of change between Q3 and Q4, but all in for the full year, taking in the first half. We'll see a small amount of margin expansion in gross margin for the year. Great.

Catherine R. Smith: Yes. I can help there. So, what's included in our full year guidance, little bit of change between Q3 and Q4, but all in for the full year, taking in the first half. We'll see a small amount of margin expansion in gross margin for the year.

Speaker Change: Yeah, as you mentioned, we were such a bright on plan and, um...

Speaker Change: and with the cell truze and the sales and everything. So yeah, it's not remarkable and it's a certainly one way or the other. It was solid. It was good. But yeah.

Great. Thanks so much guys. Best of luck for the rest of the year. Thank you.

Simeon Avram Siegel: Great. Thanks so much guys. Best of luck for the rest of the year.

Thanks so much guys. That's luck for the rest of the year. Thank you.

Peter E. Nordstrom: Thank you.

Operator: And the next question comes from the line of Lorraine Hutchinson with Bank of America. Please, proceed.

Speaker Change: Some categories were one better than I think we talked about in when it's a parallel particular was the strength there and we had a lot of good read on newness and fall stuff so we feel good about that. Yeah, good tell through and good regular price sales over year two.

Thank you. Good afternoon. I wanted to follow-up on the Rack roll out. What's the payback on a typical new Rack store? Have the news stores been hitting your plan? And what's the runway for the number of Racks you expect to open over time? Hey, Larry, does Eric all start and Kathy can shine in if she has some her color? You know, we've opened a lot of rack stores and our return on investment is pretty darn consistent.

Lorraine Hutchinson: Thank you. Good afternoon. I wanted to follow-up on the Rack roll out. What's the payback on a typical new Rack store? Have the news stores been hitting your plan? And what's the runway for the number of Racks you expect to open over time?

Peter E. Nordstrom: Yes, it's Pete, I'll start with the Rack inventory levels. I don't want to overstate this. I mean, we're slightly over there. And as you mentioned, it really is concentrated mostly in the Rack. I think most of that, there are some timing issues when you're receiving inventory like this. We always want to be opportunistic about that. Sometimes we have the opportunity to buy something and bring it in, in anticipation of stores opening. So, I think when you look at it in a month-by-month way, that doesn't really paint the whole picture.

Speaker Change: You can get a buzz, the record recorder or below, anything you could talk directly. I know we got a plan, but we could kind of put it in there, a plan.

Hey, Lorraine, this is Erik. I'll start, and Kathy can chime in, and share some her color. We've opened a lot of Rack stores and our return on investment is pretty darn consistent. We get mid-to high-teens IRR. And again, we see lots of opportunity to continue to add stores there. And we shared in the prepare remarks to we've opened 11 few to date. We intend to open 12 more this year. So that's 23. That's pretty consistent with last year. So it seems reasonable that we would expect it to be in the same range going forward next year.

Erik Nordstrom: Hey, Lorraine, this is Erik. I'll start, and Kathy can chime in, and share some more color. We've opened a lot of Rack stores and our return on investment is pretty darn consistent. We get mid-to high-teens IRR. And again, we see lots of opportunity to continue to add stores there.

Speaker Change: I'm sorry Paul, can you say that again we're having a difficult time hearing you?

Catherine R. Smith: And we shared in the prepare remarks too, we've opened 11 year-to-date, we intend to open 12 more this year, so, that's 23. That's pretty consistent with last year. So, it seems reasonable that we would expect it to be in the same range going forward next year.

Speaker Change: Sorry, just curious if you think I'm that period performed by the rest of the quarter.

Speaker Change: Well, that period performed, all right, I get under, so what you said there now. Yeah, so we didn't call out, obviously, the anniversary sales in July. And so that impacts, and we talked about the impact on the full year versus last year on a year over your comparison as a hot-air-based point for the full quarter for the total company. So there is that you do see some strength, obviously, in July because of anniversary sales.

Pete Nordstrom: So, we're always concerned about inventory levels and, we appreciate being lean, but we're not particularly concerned about being a little bit over in this moment Rack, particularly given the fact that we've got the possible momentum to our comp Rack stores. We have new Rack stores coming on, and the rack.com businesses is growing too.

Speaker Change #100: but I wouldn't have called out as if you pulled that out of when the call that ending. We saw good strings across all months in the quarter.

And the next question comes from a line of Alex Strutton with Morgan Stanley. Please proceed.

Alexandra Straton: Perfect. Thanks a lot for taking the questions. Just on to follow-up on the inventory question. I think you said that the Rack was where some of that excess was concentrated. Was that intentional? Like build into holiday or if you can just give us some more color there? And then just on the full year guidance given you beat the second quarter EPS by a lot, but you're only increasing the full year by a little. Does that mean you have a worse back half outlook than you did three months ago? Or how should I contextualize that? Thanks a lot.

Speaker Change #101: Thank you very much.

Speaker Change #102: All right, we want to thank you for joining today's call, a replay along with the slight presentation and prepared remarks. We will be available for one year on our website. Thank you for your interest in Nordstrom.

Speaker Change #103: which concludes today's conference. You may now disconnect your lines at this time and enjoy the rest of your day.

Speaker Change #104: looking likeme

Catherine R. Smith: And Alex, I'll take the guidance question. So, I appreciate your question. We are encouraged, obviously, by the performance to the first half. We're really pleased to see the continued strength on the top line at those banners. But the environment does remain uncertain. And we've got a really big part of the back half of the year as with all retailers. 2/3 of our profits typically come in the second half, and we're just being thoughtful around that. So we're being prudent, hopefully--and a little appropriately cautious with our outlook. And we'll see how the next two quarters play out. 

Kathy Smith: So we're being prudent, hopefully--and a little appropriately cautious with our outlook. And we'll see how the next two quarters play out. 

Chuck Graham: And the next question comes from the line of Chuck Graham with Gordon has kids. Please, please. Hey, thanks so much. Congrats on the success of the rack. Here's the traffic ticket composition of the 4.1% comp, how the how the comp phase throughout the quarter and any thoughts on the first few weeks of August, specifically at the rack. Yeah, I'm happy to start. So throughout the quarter, I wouldn't say there was any, any specific pattern for the rack in particular.

Operator: And the next question comes from the line of Chuck Grom with Gordon Haskett. Please, proceed.

C: Hey, thanks so much. Congrats on the success of the Rack. Curious, the traffic ticket composition of the 4.1% comp, how the comp phase throughout the quarter? And any thoughts on the first few weeks of August, specifically at the Rack. Yeah, I'm happy to start. So throughout the quarter, I wouldn't say there was any, any specific pattern for the rack in particular.

Chuck Grom: Hey, thanks so much. Congrats on the success of the Rack. Curious, the traffic ticket composition of the 4.1% comp, how the comp phase throughout the quarter? And any thoughts on the first few weeks of August, specifically at the Rack.

Catherine R. Smith: Yeah, I'm happy to start. So throughout the quarter, I wouldn't say there was any specific pattern for the Rack in particular. The quarter generally played out stronger towards the end in July, but I wouldn't have picked out any particular pattern there. And then the total Rack banner, 8.8% sales, comp was 4.1%, new stores are largely the difference. I think that one or two small closures in there, but other than that, that's pretty much what's making up the balance of it.

Chuck Graham: You know, the quarter generally played out shorter towards the end in July, but I wouldn't have picked out any particular pattern there. And then, you know, a total rack banner, 8.8% sales, comp plus 4.1, new stores are largely the difference. I think that one or two small closures in there, but there's not that that's pretty much what's making up the balance of it.

Kathy Smith: Okay, just anything on traffic and ticket composition. Traffic was struck across the digital channels in particular is what I would have said the. So the stores channels were also on a comp basis fairly flat, new sort of obviously strong. And then the digital was a particular standout in both both banners for us. Okay, great. Thanks. And then my father says the gross margin 36.6. It's not your best ever. It's probably one of your best quarters ever.

Chuck Grom: Okay, just anything on traffic and ticket composition?

Traffic was strong across the digital channels, in particular, is what I would have said. So, the stores channels were also on a comp basis fairly flat, new store is obviously strong. And then the digital was a particular standout in both banners for us. Okay, great. Thanks. And then my father says the gross margin 36.6. It's not your best ever. It's probably one of your best quarters ever.

Catherine R. Smith: Traffic was strong across the digital channels, in particular, is what I would have said. So, the stores channels were also on a comp basis fairly flat, new store is obviously strong. And then the digital was a particular standout in both banners for us.

Okay, great. Thanks. And then my follow-up is just on the gross margin 36.6%. If it's not your best ever, it's probably one of your best quarters ever. I'm curious the impact across the two banners on that success, and how much--and in particular, how much is being driven by the Rack in particular? And I guess the sustainability of that 36.6 going forward. It sounds like you're guiding to a little bit of compression relative to that number in the back half, but just any color there would be helpful. Thanks. Yeah, we don't typically break out the panels for the banners just yet.

Chuck Grom: Okay, great. Thanks. And then my follow-up is just on the gross margin 36.6%. If it's not your best ever, it's probably one of your best quarters ever. I'm curious the impact across the two banners on that success, and how much--and in particular, how much is being driven by the Rack in particular? And I guess the sustainability of that 36.6 going forward. It sounds like you're guiding to a little bit of compression relative to that number in the back half, but just any color there would be helpful. Thanks.

Kathy Smith: I'm curious the impact across the two banners on that success and how much and in particular, how much is being driven by the rack in particular and I guess the sustainability of that 36.6 going forward. It sounds like you're guiding to a little bit of compression relative to that number in the back half, but just any color there would be helpful. Thanks. Yeah, we don't typically break out the panels for the banners just yet.

Catherine R. Smith: Yeah, we don't typically break out the P&Ls for the banners just yet. Maybe we'll get there eventually. So, in total to your point, though, we're pleased with the gross margin expansion over 155--or about 155 basis points year-over-year. Strong rig price sales, that's in both banners, that comment is definitely both banners leveraging the volume continuing. And in the shrink comments, the improvement off of our historical highs on shrink is both banners as well. So, those are comments for both. To your point, I think it is, at least in recent history, a high that we're seeing. Good progress there. But as we provided in our guidance, we're cautiously planning for the back half of the year.

Kathy Smith: Maybe we'll get there eventually. So in total to your point, though, we're pleased with the gross margin expansion over 150 or about 150 by basis points every year. Strong rate by sales. That's in both banners that come is definitely both banners leveraging the volume continuing. Strength comments and improvement off of our historical highs on shrink is both banners as well. So those are comments for both to your point. I think it is, at least in recent history, a high that we're seeing. Good progress there. But as we provided in our guidance, we're we're cautiously planning for the back half of the year.

Operator: And the next question comes from the line of Blake Anderson with Jefferies. Please, proceed.

Blake Anderson: Hi, thanks for taking our question. I wanted to ask on designer in particular, how is the performance there during the quarter? Can you comment on kind of the full price sell-through your seeing in that category? And then how is that inventory position for the back half? I know you mentioned most of the increase was Rack, but just curious how designer was fairing in term as well? And then just wanted to ask on Nordstrom banner more broadly. I think you guys mentioned a few initiatives such as broadening assortment and price points. I was wondering if you could comment a little bit more on what you did there. That'd be great. Thanks so much.

Pete Nordstrom: I think you guys mentioned a few initiatives such as broadening assortment and price points. I was wondering if you could comment a little bit more on what you did there. That'd be great. Thanks so much, with the Decider Army. It feels like it's been kind of a consistent theme here for a while, and certainly you're seeing it with other retailers in that space as well. It's been challenging. You know, there was a lot of growth for a couple of years, and we've been articulating that kind of right sizing.

I think you guys mentioned a few initiatives such as broadening assortment and price points. I was wondering if you could comment a little bit more on what you did there. That'd be great. Thanks so much,

Peter E. Nordstrom: Hi, it's Pete. With the design, I mean, it feels like it's been kind of a consistent theme here for a while, and certainly you're seeing it with other retailers in that space as well. It's been challenging. There was a lot of growth for a couple of years, and now we've been articulating that kind of right-sizing.

Pete Nordstrom: So, we're looking at '19 numbers, and we're pretty close to what '19 was. It's hard for us to predict if that is leveled out entirely or not. As Cathy just said, I guess we'll see what the next couple of quarters bring. So, what we've just tried to put ourselves in an advantageous place with inventory levels. So, we're not caught in a tough spot. And our team worked really hard on that, and we've had a lot of good collaboration with our vendor partners. So, not a lot to report other than it's still relatively challenging in our space. You know, there's a lot of things to call out.

So, we're looking at '19 numbers, and we're pretty close to what '19 was. It's hard for us to predict if that is leveled out entirely or not. As Cathy just said, I guess we'll see what the next couple of quarters bring. So, what we've just tried to put ourselves in an advantageous place with inventory levels. So, we're not caught in a tough spot. And our team worked really hard on that, and we've had a lot of good collaboration with our vendor partners. So, not a lot to report other than it's still relatively challenging in our space.

Erik Nordstrom: This is Erik. For the merchant banner, a couple of things to call out. Let me start with stores. It always starts with customer service. I think our team has done a lot of the the blocking and tackling the taking care of customers. I have a great focus there. Secondly, as Pete mentioned, we've got a lot of events just making our stores interesting places to come to. That's particularly leveraging our Nordy Club, our loyalty program. We've seen some good traction there. And last at call for stores, the merch mix there. That includes a balance of price points. We have a broad offer, and we need to manage that well to have everything from the Ams to Valentino and our teams did a good job on that. And also, really having authority around our best brands, to make sure we start with them.

Erik Nordstrom: Let me start with stores. It always starts with customer service. I think your team there's a lot of the, you know, the blocking and tackling the taking care of customers. I have a great focus there. Secondly, as Pete mentioned, we've got a lot of events just making our stores interesting places to come to. That's particularly leveraging our Nordic Lover loyalty program. We've seen some good traction there. And last at call for stores, the merch mix there.

Erik Nordstrom: That includes a balance of price points. We have a broad offer, and we need to manage that well to have everything from the Ams to Valentino and our teams did a good job on that. And also, really having authority around our best brands, to make sure we start with them.

Erik Nordstrom: On the digital business, I think as Cathy mentioned, we had a strong digital business over the quarter. Some of it's--again, I think just the execution the enhancements to search and discovery has been helpful. That balance of price points is particularly important online. And we had a real strong focus on stock rates and of our fastest turning items. That was a big part of it. Choice counts are always important. That played out a little more on rack.com and nordstrom.com.

Erik Nordstrom: And then lastly, as we mentioned, we did launch our marketplace early this year. It's still small, but the feedback, one of the numbers have been all ahead of our plan while not materially yet. It's also encouraging. And more qualitatively, we've got good feedback from our vendors on that. So, we feel like we're on track with our marketplace.

Operator: That's very helpful. Thanks so much.

Dylan Carden: And the next question will come from the line of Dylan Carden with William Blair. Please proceed. Really appreciate it.

Operator: And the next question will come from the line of Dylan Carden with William Blair. Please, proceed.

Please proceed. Really appreciate it.

Please proceed.

Really appreciate it. Just curious on Rack, particularly as it relates to guidance, did you feel like you have the inventory in that banner from a price point standpoint and just sort of access and availability and flow in a place where that could be a continued source of upside? Or at the very least kind of comping more in line with sort of the pier set there, go forward, back half? Yeah, there's Pete, I, we're definitely on the right track there.

Dylan Carden: Really appreciate it. Just curious on Rack, particularly as it relates to guidance, did you feel like you have the inventory in that banner from a price point standpoint and just sort of access and availability and flow in a place where that could be a continued source of upside? Or at the very least kind of comping more in line with sort of the pier set there, go forward, back half?

Pete Nordstrom: Just curious on RAC, particularly as it relates to guidance, do you feel like you have the inventory in that banner from a price point standpoint and just sort of access and availability and flow in a place where that could be a continued source of upside or at the very least kind of copying more online? with sort of the pier set there. Go forward, back half. Yeah, there's Pete, I, we're definitely on the right track there.

Peter E. Nordstrom: Yeah, this is Pete. We're definitely on the right track there. You've heard us talk about great brands at great prices and what makes our offer different the off-price space is access to some of these premium brands that we carry in the Nordstrom banner. And the more we lead into that, the better we do. We've got a lot of confidence around the proof point of that strategy. Our teams are well connected to the opportunity to be able to procure that merchandise. And so, at least so far we've seen no reason to believe we can't keep going even as we add new stores there. There's a good opportunity for us to buy great merchandise out there and we pursue that every day.

Pete Nordstrom: You've heard us talk about great brands of great prices and what makes our offer different the off price space is access to some of these premium brands that we carry in the Nordstrom banner. And the more we lead into that, the better we do. We've got a lot of confidence around the proof point of that strategy. Our teams are well connected. To the opportunities to build a procure that that merchandise and so at least so far we've seen no reason to believe we can't keep going even as we add new stores there. There's a good opportunity for us to buy great merchandise out there and we pursue that every day.

Pete Nordstrom: And just on the beauty side of things you're calling that out as sort of a bright spot which kind of bucks the industry right now, do you feel like you're doing a better job defending share in that channel? Is that just a comparison? How should we think about why you might be outside some of the broader trends in that space? Thanks. Yeah, Pete again, that's a great question. I think relative to our offer, you know, that the low single-digit growth without there it's been solved and pretty good.

Dylan Carden: And just on the beauty side of things you're calling that out as sort of a bright spot which kind of bucks the industry right now, do you feel like you're doing a better job defending share in that channel? Is that just a comparison? How should we think about why you might be outside some of the broader trends in that space? Thanks.

Thanks. Yeah, Pete again, that's a great question. I think relative to our offer, you know, that the low single-digit growth without there it's been solved and pretty good.

Thanks.

Yeah, it's Pete again. That's a great question. I think relative to our offer, the low single-digit growth we've had there, it's been solid and pretty good. But as you're remarking on there, the whole industry's done pretty well. So, market share is an important thing that we look at. And I think it's important that we don't get complacent because we've had pretty good this relative to the rest of our categories. We do pay a lot of attention what's going on out there relative to market share. And we're always really looking for new and better ways to serve customers in that space, and thinking about newness and innovation with products. So yeah, I don't want to say the signal that we've got it all figured out there on race and we know we can do better and it's competitive market. Thanks. Appreciate it.

Peter E. Nordstrom: Yeah, it's Pete again. That's a great question. I think relative to our offer, the low single-digit growth we've had there, it's been solid and pretty good. But as you're remarking on there, the whole industry's done pretty well. So, market share is an important thing that we look at. And I think it's important that we don't get complacent because we've had pretty good business relative to the rest of our categories. We do pay a lot of attention what's going on out there relative to market share. And we're always really looking for new and better ways to serve customers in that space, and thinking about newness and innovation with products. So, yeah, I don't want to send the signal that we've got it all figured out there and raising it. We know we can do better and it's a competitive market.

Pete Nordstrom: But as you're remarking on there, it's the whole industry's done pretty well. So market share is an important thing that we look at. And I think it's important that we don't get complacent because we've had pretty good this relative to the rest of our categories. We do pay a lot of attention what's going on out there relative to market share. And we're always really looking for new and better ways to serve customers in that space and thinking about newness and innovation with products. So yeah, I don't want to say the signal that we've got it all figured out there on race and we know we can do better and it's competitive market. Thanks. Appreciate it.

So yeah, I don't want to say the signal that we've got it all figured out there on race and we know we can do better and it's competitive market. Thanks. Appreciate it.

So yeah, I don't want to say the signal that we've got it all figured out there on race and we know we can do better and it's competitive market.

Thanks. Appreciate it.

Operator: And our last question will come from the line of Paul Lejuez was with Citigroup. Please, proceed.

Paul Leif: And our last question will come from the line of Paul Leif was with steady group. Please proceed. Hey, thanks guys. I don't know if I missed it, but did you say what the performance wise during the anniversary sale like numerically? I was performed versus the rest of the business during the quarter. And then second, I'm curious if just the description of the cost method of accounting, the learning impact on growth margin and or inventory from that switch in the second quarter.

And our last question will come from the line of Paul Leif was with steady group. Please proceed.

Paul Lejuez: Hey, thanks, guys. Curious, I don't know if I missed it, but did you say what the performance was during the Anniversary Sale like numerically? How it performed versus the rest of the business during the quarter. And then second, I'm curious if just the switch of the cost method of accounting, was there any impact on growth margin and/or inventory from that switch in the second quarter? And then if there's anything we should be thinking about in the third quarter related to that switch?

Paul Leif: And then there's anything we should be thinking about in the third quarter. Ladies about switch. Hi Paul, I'll take the cost accounting and I think the first part of your question was just the performance of the anniversary sale if that's not it and come back at us and peak and can finish up there on accounting. No, no, no particular impact I would call out in the quarter remembering when we went when we talked about our full year guide at the beginning of the year.

And then there's anything we should be thinking about in the third quarter. Ladies about switch.

Catherine R. Smith: Hi, Paul, I'll take the cost accounting and I think the first part of your question was just the performance of the anniversary sale, if that's not, then come back at us and Pete can finish up there. On accounting, no particular impact I would call out in the quarter. Remembering when we talked about our full year guide at the beginning of the year.

Paul Leif: We said there's probably about 10 basis points that we were going to see this year and it's purely a timing impact as we move between periods. But from period-to-period, it's possible that I would say generally, I would think of cost accounting as--the move cost accounting from retail as a driver of the performance. It really is just a timing conversation at times. And Pete will finish up if there's anything. I think your question was anniversary performance?

Paul Leif: I think your question was anniversary performance. Yeah, as we mentioned, we were searching right on plan and with the cell truths and the sales and everything. So, yeah, it's not remarkable necessarily one way or the other. It was solid, it was good. But, yeah, some categories. One better than others, I think we talked about when it's a parallel particular was was the strength there. And we had a lot of good read on newness and fall stuff, so we figured out that.

I think your question was anniversary performance.

Yes, exactly. Just like how--was it up or down versus last year during the Anniversary Sale period? we were searching right on plan and with the cell truths and the sales and everything. So, yeah, it's not remarkable necessarily one way or the other. It was solid, it was good. But, yeah, some categories. One better than others, I think we talked about when it's a parallel particular was was the strength there. And we had a lot of good read on newness and fall stuff, so we figured out that.

Paul Lejuez: Yes, exactly. Just like how--was it up or down versus last year during the Anniversary Sale period?

Peter E. Nordstrom: Yes. As we mentioned we were essentially right on plan and with the sell-throughs, and the sales and everything. So, yeah, it's not remarkable necessarily one way or the other. It was solid, it was good. But, yeah, some categories performed better than others. I think we talked about in women's apparel in particular was the strength there. And we got a lot of good read on newness and fall stuff. So, we feel good about that.

Paul Leif: Yeah, good sell through a good regular price sales over year two. Yep. Yeah, you get a buzz, the right for the quarter or below anything you could talk directionally. I know it was on plan, but we kind of didn't know your plan. I'm sorry Paul, can you say that again, we're having a difficult time hearing you. Sorry, just curious if you could say how that period performed versus the rest of the quarter.

Catherine R. Smith: Yes. Good sell-through and good regular price sales year-over-year, too.

Yes. Is it above the rest of the quarter or is it below? I mean, do you think you could talk directionally? I know I was on plan, but we didn't kind of--we didn't hear your plan. you get a buzz, the right for the quarter or below anything you could talk directionally. I know it was on plan, but we kind of didn't know your plan. I'm sorry Paul, can you say that again, we're having a difficult time hearing you. Sorry, just curious if you could say how that period performed versus the rest of the quarter.

Paul Lejuez: Yes. Is it above the rest of the quarter or is it below? I mean, do you think you could talk directionally? I know I was on plan, but we didn't kind of--we didn't hear your plan.

I'm sorry Paul, can you say that again, we're having a difficult time hearing you. Sorry, just curious if you could say how that period performed versus the rest of the quarter.

Catherine R. Smith: I'm sorry Paul, can you say that again, we're having a difficult time hearing you.

Paul Lejuez: Sorry, just curious if you could say how that period performed versus the rest of the quarter?

Catherine R. Smith: How that period performed, sorry, I understood what you said there now. Yeah, so we didn't call out--obviously the Anniversary Sales in July. And so, that impacts--and we talked about the impact on the full year versus last year on a year-over-year comparison as 100 basis points for the full quarter for the total company. So, there is--you do see some strength, obviously, in July because of Anniversary Sale, but I wouldn't have called out--if you pulled that out of when they called out. I think we saw good strength across all months in the quarter.

James Duies: All right. We want to thank you for joining today's call. A replay, along with the slide presentation and prepared remarks will be available for one year on our website. Thank you for your interest in Nordstrom.

Operator: Thank you for your interest in Nordstrom.

Operator: This concludes today's conference. You may now disconnect your lines at this time. Enjoy the rest of your day. 

Operator: Thank you.