Q3 2024 Nordstrom Inc Earnings Call

November 26, 2024

Remarks, followed by a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

And as a reminder, this conference is being recorded.

At this time I'll turn the call over to Jamie do it head of Investor Relations for Nordstrom. Thank you you may begin.

Good afternoon, and thank you for joining us 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 Dot com. Our discussion may include forward looking statements. So please refer to the slide with our Safe Harbor language.

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 third 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 reconciliations to the most directly comparable GAAP measures can be found in our Q3 2024 earnings press release, which is available on our website.

As we begin I want to acknowledge the company's prior announcements regarding the board of directors exploration of potential avenues to enhance shareholder value. The formation of a special committee to evaluate any proposal that might be presented by members of the Nordstrom family to take the company private and the receipt of such proposal.

September 3rd.

We will not be commenting on this topic or speaking to this matter during our call today.

Eric: Now I'll turn the call over to Eric.

Eric: Thank you Jamie and good afternoon, everyone. Thanks for joining us today.

Eric: Start with our third quarter performance and discuss the progress we have made against our three priorities and finish with some comments on the current retail environment.

Eric: In the third quarter, our efforts to enhance the customer experience continued to resonate enabling growth in net and comparable sales margin expansion and an increase in our customer base.

Eric: We delivered solid results with net sales, reaching over $3 3 billion along with earnings per share of <unk> 33.

Eric: Both Nordstrom and Nordstrom rack delivered 4% comparable sales growth.

Eric: We're particularly encouraged that our online business sustained its momentum with digital sales growth up over 6%.

Eric: Customers responded to newness in our selection of the brands that matter most to them.

Eric: Giving positive total company net sales growth for the fourth consecutive quarter.

Eric: Moving on to our three priorities for the year of driving Nordstrom banner growth operational optimization and building on the momentum at the rack.

Eric: Driving Nordstrom banner growth is a key part of our strategy and we continued to make progress during the third quarter.

A curated selection of merchandise with greater depth and our customers' favorite brands across our fleet and not just in our largest stores helped drive the results as.

Eric: As an omnichannel retailer, we have to be prepared to serve customers, when where and how they want to shop and services always our number one priority.

Eric: Our customers define what good service is not us and our teams are very focused on taking care of each and every customer who shop with us.

Eric: Take this commitment to serving our customers seriously from the initial greeting to providing assistance in our point of view at the fitting room to completing the sale.

Eric: For our customers that prefer to shop online, we aimed to make the experience seamless and engaging through technology.

Eric: At <unk> Dot Com net sales growth in the third quarter was supported by the enhancements to the search and discovery functionality on our site and in our App as well as improvements in our assortment, especially have items under $100 in price.

Eric: We continued to scale our marketplace business in the third quarter, which now has over 300 sellers offering a wide selection to our customers.

Eric: We look forward to continuing to grow this business in 2025 and beyond.

Eric: Another key priority for this year is operational optimization, given the progress our supply chain team has made on reducing operating expenses at.

Eric: They have expanded their focus to increasing speed by quickly getting orders to our customers' doorsteps and moving product efficiently through our network to provide relevance and freshness.

Eric: We know our customers desire speed, which can improve the customer experience as well as our financial outcome for example, faster fulfillment and delivery of items drove an over 40% improvement in the speed of customer returns in the third quarter.

Eric: Returns that come in faster mean that we can process inspect and get the items back into our inventory and our sellable condition in less time, increasing the products overall full price exposure.

Throughout the year the supply chain teams efforts have also supported our new rack store openings successfully.

Eric: Recently, they have positioned us well heading into holiday in terms of inventory flow staffing and shipping capacity.

Eric: We also continued to advance our priority to build on the momentum at the rack during the third quarter.

Eric: Our strategy of offering great brands at Great prices continues to give customers a reason to choose Nordstrom rack.

Eric: In the third quarter customers responded positively to our offering driving net sales growth higher for the fourth consecutive quarter.

Eric: We also opened 12 new stores during Q3, bringing the full year total to 23, which is consistent with our plans to open 20 to 25, new racks per year.

Eric: New rack stores continued to be a great investment for us as they deliver a solid return on capital while attracting new customers.

Eric: Nordstrom rack dot com remains a differentiator and off price retail, enabling customers to shop, when and how they want.

Eric: <unk> digital sales growth in the third quarter was driven by an expanded online merchandise offering as well as focused efforts to maintain high in stock rates and our fastest selling items.

Eric: Towards the end of the quarter, we launched store fulfillment for rack digital orders in over 100 of our rack stores around the country.

Eric: Our efforts to improve the integrity of our inventory are enabling us to work towards optimizing that part of our store operations prior to expanding to our entire fleet of rack stores.

Eric: So excited to have launched buy online and pickup in stores at those same hundred plus rack stores for the first time ever in the third quarter.

Eric: This allows nordstrom rack dot com shoppers to purchase select items online and pick them up same day and their nearest rack location.

Eric: We're pleased with the early results of these new services and are excited about the opportunity to better serve our customers drive sales and expand margins.

Eric: Looking ahead, the fourth quarter is a significant one for us and provides us with the important opportunity to serve our customers.

Across the company. Our teams are focused on executing an exceptional holiday shopping experience with gifts for everyone. At every budget, an enhanced digital experience convenience services and festive events, both in stores and online.

Eric: While we are excited about and well prepared for the holiday season, there was a noticeable decline in sales trends towards the end of October.

Eric: As Youll hear from Kathy in a moment, we are updating our full year guidance, which takes the slowdown into consideration and.

Eric: In advance of this holiday season, I want to thank our teams across the company for their hard work and taking care of our customers. During this busy time.

Eric: We're excited about the season and wish everyone a happy holiday.

Eric: Now I'll turn it over to Pete.

Pete Nordstrom: Know that our customers have a lot of choices when it comes to shopping which is why we offer a selection of their favorite brands as well in new and emerging ones, enabling the discovery of new looks and styles in stores merchandising. It's all about curating, an assortment of our best brands that appeal to our customers. This year, we've edited out some brands in order.

Pete Nordstrom: To amplify the best ones to create focus and our point of view in our stores and.

Pete Nordstrom: In our digital business, we aim to serve more customers on more occasions with more choices. We're encouraged that our teams are executing well on both of these merchandising strategies.

Pete Nordstrom: From a total company perspective, the top performing categories in the third quarter were women's apparel active shoes and men's apparel our.

Pete Nordstrom: I'll first cover our merchandise performance at each of our banners and our Nordstrom banner, we've been focused on building selection and depth in our customers' favorite brands across all stores, particularly in women's apparel this year in.

Pete Nordstrom: In the third quarter, leading brands, such as Vince and Veronica Beard helped drive mid teens growth in this category.

Pete Nordstrom: Active which includes apparel and shoes continued its impressive run is a top category at our Nordstrom banner relative.

We know that our customers have a lot of choices when it comes to shopping which is why we offer a selection of their favorite brands as well in new and emerging ones, enabling the discovery of new looks and styles in stores merchandising. It's all about curating, an assortment of our best brands that appeals to our customers. This year, we've edited out some brands and <unk>.

Pete Nordstrom: Relevant brand offerings drove low teens growth led by some of our customers' favorites such as on running HOKA and vre.

Pete Nordstrom: <unk> category is an important one for us given our company's history and it performed well in the third quarter one of the contributors to the growth was our make room for shoes campaign, which highlights certain of our customers' favorite brands with new and unique inventory each month, the third quarter strength in women's shoes was fueled by notable say.

Order to amplify the best ones to create focus and our point of view in our stores.

And our digital business, we aim to serve more customers on more occasions with more choices. We're encouraged that our teams are executing well on both of these merchandising strategies.

Pete Nordstrom: <unk> increases from brands, including Stuart Weitzman, Veronica Beard and Vince.

Pete Nordstrom: Men's apparel another important category for us rounds out our top performers in the third quarter similar to our efforts in womens we are focused on providing more consistent assortments and increased selection across our fleet of stores in the third quarter men's apparel growth was driven by dress wear and contemporary styles.

From a total company perspective, the top performing categories in the third quarter were women's apparel active shoes and men's apparel alpha.

I'll first cover our merchandise performance at each of our banners and our Nordstrom banner, we've been focused on building selection and depth in our customers' favorite brands across all stores, particularly in women's apparel this year in.

Pete Nordstrom: At the rack our strategy of offering great brands at great prices resonated with customers in the third quarter driving double digit topline growth.

In the third quarter, leading brands, such as Vince and Veronica Beard helped drive mid teens growth in this category.

Pete Nordstrom: From a merchandize perspective in women's apparel premium denim and dresses were strong performers in the third quarter. The active category sustained its double digit growth driven by active shoes and men's apparel sportswear drove the largest volume gain and rounding out the top categories in Q3 as shoes, which was led by casual sneakers.

Active which includes apparel and shoes continued its impressive run is a top category at our Nordstrom banner relevant brand offerings drove low teens growth led by some of our customers' favorites such as on running HOKA and vre.

The shoes category is an important one for us given our company's history and it performed well in the third quarter one of the contributors to the growth was our make room for shoes campaign, which highlights certain of our customers' favorite brands with new and unique inventory each month.

Pete Nordstrom: <unk>.

Pete Nordstrom: I'd like to also make some comments about our Nordstrom private brands, which are available at both banners.

Pete Nordstrom: We continue to be pleased with the customer response and performance in the third quarter Nordstrom Zeller and open edit were strong performers helping to drive double digit growth in sales of our private brands as customers recognize the quality style and value of our offering.

Third quarter strength in women's shoes was fueled by notable sales increases from brands, including Stuart Weitzman, Veronica Beard and Vince <unk>.

Moving on to our inventory position at the end of Q3, which grew 6% year over year versus 5% in sales.

Men's apparel another important category for us rounds out our top performers in the third quarter.

Similar to our efforts in womens we are focused on providing more consistent assortments and increased selection across our fleet of stores in the third quarter men's apparel growth was driven by dress wear and contemporary styles at.

Pete Nordstrom: Inventory growth in the third quarter was partially driven by some seasonal categories, such as boots, sweaters and outerwear that were slower in some parts of the country.

Pete Nordstrom: At the Nordstrom banner, our inventories highly penetrated with our best brands and consists of lower clearance and aged inventory versus a year ago.

At the rack our strategy of offering great brands at great prices resonated with customers in the third quarter driving double digit top line growth from.

Pete Nordstrom: At the rack inventories are higher than last year, yet also over indexed to the best performing brands driving the growth as the inventory needed to ramp up our new rack stores as well as an increased selection available on Nordstrom rack dot com, where we've added over 30000 customer choices to the site.

From a merchandize perspective in women's apparel premium denim and dresses were strong performers in the third quarter. The active category sustained its double digit growth driven by active shoes.

In men's apparel sportswear drove the largest volume gain and rounding out the top categories. In Q3 is shoes, which was led by casual sneakers.

Pete Nordstrom: While our inventory growth in the third quarter was slightly higher than we'd prefer we continue to feel good about the content of our inventory.

I'd like to also make some comments about our Nordstrom private brands, which are available at both banners.

Pete Nordstrom: Turning to a few of the highlights of what we have planned for holiday. We're excited about the season and the opportunities that lie ahead for us in the fourth quarter. This year were making our customers' holiday shopping easy and fun prioritizing a well rounded assortment across both banners that blends relevance and inspiration at all price points. We recently launched our 2012.

We continue to be pleased with the customer response and performance in the third quarter Nordstrom Zyla and open edit were strong performers helping to drive double digit growth in sales of our private brands as customers recognize the quality style and value of our offering.

For holiday catalog with items focus on gifting and holiday dressing.

Moving on to our inventory position at the end of Q3, which grew 6% year over year versus 5% in sales.

Pete Nordstrom: And apparel sweaters are a key gifting item and our teams have curated a great selection.

Inventory growth in the third quarter was partially driven by some seasonal categories, such as boots, sweaters and outerwear that were slower in some parts of the country.

Pete Nordstrom: In beauty the teams have been focused on making Nordstrom the destination to shop for luxury fragrances. This holiday season building our momentum in this area.

At the Nordstrom banner, our inventories highly penetrated with our best brands and consists of lower clearance and aged inventory versus a year ago.

Pete Nordstrom: At the rack, where invested across categories and price points to offer customers a relevant selection of great brands at great prices as Eric mentioned, we're making it easier to shop with the addition of buy online pickup in store and over 100 of our rack locations. We're also introducing rush the rack and exclusive new App feature for Nordic Club members notify.

At the rack inventories are higher than last year. It also over indexed to the best performing brands driving the growth as the inventory needed to ramp up our new rack stores as well as an increased selection available on Nordstrom rack dot com, where we've added over 30000 customer choices to the site.

Pete Nordstrom: Them about the newest in store merchandise arrivals. So they can be the first to shop.

While our inventory growth in the third quarter was slightly higher than we'd prefer we continue to feel good about the content of our inventory.

Pete Nordstrom: We're hosting experiences and events to celebrate the holiday from virtual events with fashion experts to festive in store experiences across the country like letters to Santa holiday glam up days, the one day only beauty bash in more.

Turning to a few of the highlights of what we have planned for holiday. We're excited about the season and the opportunities that lie ahead for us in the fourth quarter. This year were making our customers' holiday shopping easy and fun prioritizing a well rounded assortment across both banners that blends relevance and inspiration at all price points. We recently launched our 'twenty two.

Pete Nordstrom: At our New York City flagship store, our special holiday activation includes hosting daily Santa Snow shows offering a holiday weekend brunch series and starting tomorrow, we're unveiling the blizz on 57th Street, which will feature larger than life talking inflatable characters throughout the store, we're excited to be providing.

For holiday catalog with items focus on gifting and holiday dressing.

In apparel sweaters are a key gifting item and our teams have curated a great selection.

Pete Nordstrom: Customers with fun and engaging experiences this holiday season.

In beauty the teams have been focused on making Nordstrom the destination to shop for luxury fragrances. This holiday season building our momentum in this area.

Speaker Change: Before I turn it over to Kathy I would like to Echo Eric's comments thanking our teams for the hard work that they do in providing service to our customers all year as well as wishing them and all of you happy holidays.

At the rack, where invested across categories and price points to offer customers a relevant selection of great brands at great prices as Eric mentioned, we're making it easier to shop with the addition of buy online pickup in store and over 100 of our rack locations. We're also introducing rushed the rack and exclusive new App feature for Nordic club members notify.

Speaker Change: We will now go to Kathy for an update on our financial results.

Kathy: Thanks, Pete and thank you all for joining us.

Kathy: I'll begin by covering our third quarter results, then discuss our outlook and close with our capital allocation priorities.

Kathy: In the third quarter, we again delivered solid results with growth in net sales and EBIT as well as margin expansion.

Them about the newest in store merchandise arrivals. So they can be the first to shop.

We're hosting experiences and events to celebrate the holiday from virtual events with fashion experts to festive in store experiences across the country like letter Susannah holiday glam up days, the one day only beauty Bash and more.

Kathy: Total company net sales increased four 6% in the third quarter driven by positive results at both banners.

Kathy: <unk> shifted the anniversary sale with one day falling in the third quarter of this year versus eight days last year had a negative impact on net sales of approximately 100 basis points.

At our New York City flagship store, our special holiday activation includes hosting daily Santa Snow shows offering a holiday weekend brunch series and starting tomorrow, we're unveiling the blizz on 57th Street, which will feature larger than life talking inflatable characters throughout the store, we're excited to be providing.

Kathy: Comparable sales increased 4% with positive comps in both banners and particular strength in digital channels.

Kathy: <unk> increased five 3% in the third quarter.

Kathy: Nordstrom banner net sales increased one 3% while comparable sales grew 4%. The difference is mainly due to the use of a realigned calendar for comparable sales, which eliminates the approximately 200 basis point negative impact from the timing of the anniversary sale, which is reflected in net sales.

Customers with fun and engaging experiences this holiday season.

Speaker Change: Before I turn it over to Kathy I'd like to Echo Eric's comments thanking our teams for the hard work that they do in providing service to our customers all year as well as wishing them and all of you happy holidays will now go to Kathy for an update on our financial results.

Kathy: Nordstrom rack net sales increased 10, 6% with comparable sales increasing three 9%.

Kathy: Thanks, Pete and thank you all for joining us I'll begin by covering our third quarter results, then discuss our outlook and close with our capital allocation priorities in the third quarter. We again delivered solid results with growth in net sales and EBIT as well as margin expansion.

Kathy: Digital sales grew six 4% in Q3, representing the sixth consecutive quarter of sequential improvement.

Kathy: The timing shift of the anniversary sale had a negative impact on digital sales of approximately 100 basis points.

Kathy: Total company net sales increased four 6% in the third quarter driven by positive results at both banners the.

Kathy: Digital sales represented 34% of total sales during the quarter.

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

Gross profit as a percentage of net sales expanded 60 basis points to 35, 6% primarily on strong regular price sales.

Kathy: Comparable sales increased 4% with positive comps in both banners and particular strength in digital channels.

Kathy: Ending inventory increased five 9% versus a year ago.

Kathy: GMT increased five 3% in the third quarter.

Speaker Change: As Pete noted the quality of our inventory is good although the level is slightly higher than we want.

Speaker Change: Selling general and administrative expenses as a percentage of net sales of 36, 6% increased 25 basis points compared with 36, 3% in a year ago quarter. This was primarily due to higher labor costs and a charge related to accelerated techno.

Nordstrom rack net sales increased 10, 6% with comparable sales increasing three 9%.

Speaker Change: Depreciation that were partially offset by leverage on higher sales and improvements in variable costs across the business.

Kathy: Digital sales grew six 4% in Q3, representing the sixth consecutive quarter of sequential improvement.

Speaker Change: SG&A expenses after excluding the $14 million and accelerated technology depreciation decreased to 36, 2%.

Kathy: The timing shift of the anniversary sale had a negative impact on digital sales of approximately 100 basis points.

Kathy: Digital sales represented 34% of total sales during the quarter.

Speaker Change: Our EBIT margin expanded 45 basis points to two 9% driven by a more than 25% year over year increase in EBIT dollars in the third quarter.

Kathy: Gross profit as a percentage of net sales expanded 60 basis points to 35, 6% primarily on strong regular price sales.

Speaker Change: Income tax expense of $11 million or 18, 9% of pre tax earnings was higher than the $14, 2% recorded in the year ago quarter.

Kathy: Ending inventory increased five 9% versus a year ago.

Speaker Change: As Pete noted the quality of our inventory is good although the level is slightly higher than we want.

Speaker Change: Last year's income tax benefited from the wind down of our Canadian operation.

Speaker Change: Third quarter EPS of <unk> 33, <unk> is favorable to last year's 25.

Speaker Change: Largely driven by leverage on higher sales as well as the expansion of our gross margin.

Speaker Change: We ended the third quarter with $1 2 billion in available liquidity, including just under $400 million in cash.

Speaker Change: <unk> depreciation.

Speaker Change: Our balance sheet and financial position remain solid.

Speaker Change: That were partially offset by leverage on higher sales and improvements in variable costs across the business.

Speaker Change: Before moving to our outlook I'd like to offer some additional commentary on our third quarter results and the current environment.

Speaker Change: SG&A expenses after excluding the $14 million and accelerated technology depreciation decreased to 36, 2%.

Our efforts to improve the customer experience are taking hold as evidenced by the strength of our topline.

Speaker Change: In the third quarter, we again grew our customer count.

Speaker Change: Our EBIT margin expanded 45 basis points to two 9%.

Speaker Change: Reported an increase in customer trips and expanded our margin.

Speaker Change: Driven by a more than 25% year over year increase in EBIT dollars in the third quarter.

Speaker Change: Our credit card revenues as a percentage of total revenue declined modestly versus Q3 of last year.

Speaker Change: Income tax expense of $11 million or 18, 9% of pretax earnings was higher than the 14, 2% recorded in the year ago quarter.

The trend that we've experienced all year.

Speaker Change: The decline was driven by higher losses, partially offset by higher balances within the portfolio.

Speaker Change: Last year's income tax benefited from the wind down of our Canadian operation.

Speaker Change: This was consistent with our expectations.

Speaker Change: Turning to the current environment and our outlook for the year.

Speaker Change: Third quarter EPS of <unk> 33 cents is favorable to last year's 25 cents.

Speaker Change: While we continue to be pleased with our year to date results the external environment remains uncertain.

Largely driven by leverage on higher sales as well as the expansion of our gross margin.

Speaker Change: As Eric mentioned earlier, we did experience softness in sales that started around the end of October.

We ended the third quarter with $1 2 billion in available liquidity, including just under $400 million in cash.

We also have a shorter holiday season by five days this year and as a reminder, the 50 <unk> week benefited fourth quarter net sales by 460 basis points last year.

Speaker Change: Our balance sheet and financial position remain solid.

Speaker Change: Before moving to our outlook I'd like to offer some additional commentary on our third quarter results and the current environment.

Speaker Change: When considering the puts and takes and appreciating that we typically realize about 30% of the full year's net sales and approximately 40% of our annual EBIT in the fourth quarter. We believe it is prudent to remain appropriately cautious with our outlook.

Speaker Change: Our efforts to improve the customer experience are taking hold as evidenced by the strength of our topline in.

Speaker Change: In the third quarter, we again grew our customer count reported an increase in customer trips.

Speaker Change: As such we are updating and modestly increasing our outlook for revenue and comparable sales for the year.

And expanded our margins.

Our credit card revenues as a percentage of total revenue declined modestly versus Q3 of last year continue.

Speaker Change: Our updated guidance includes full year revenue in the range of flat to an increase of 1%.

Continuing the trend that we've experienced all year.

Speaker Change: The decline was driven by higher losses, partially offset by higher balances within the portfolio.

Speaker Change: This includes a headwind of approximately 135 basis points from the 50 <unk> week in 2020 threes results.

Speaker Change: This was consistent with our expectations.

Speaker Change: We now expect total company comparable sales growth of 1% to 2% in 2024 versus 52 weeks in 2023.

Speaker Change: Turning to the current environment and our outlook for the year.

Speaker Change: While we continue to be pleased with our year to date results the external environment remains uncertain.

Speaker Change: As our fiscal 2023 include a 50 <unk> week, we calculate our 2020 for comparable sales growth using a realigned 52 week 2023 period for comparability.

Speaker Change: As Eric mentioned earlier, we did experience softness in sales that started around the end of October.

Speaker Change: We also have a shorter holiday season by five days this year and as a reminder, the 50 <unk> week benefited fourth quarter net sales by 460 basis points to last year.

Speaker Change: Turning to profitability, we continue to expect a full year EBIT margin in the range of three 6% to 4%.

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

Speaker Change: From an earnings per share perspective, we expect full year results in the range of $1 75 to $2 five.

Speaker Change: Excluding the impact of any share repurchases.

Speaker Change: As a reminder, we continue to expect charges approximating 10 basis points to our reported SG&A expense as a percentage of net sales in the fourth quarter related to the accelerated technology depreciation we mentioned.

Speaker Change: As such we are updating and modestly increasing our outlook for revenue and comparable sales for the year.

Speaker Change: Our updated guidance includes full year revenue in the range of flat to an increase of 1%, which.

Speaker Change: Our capital allocation priorities remain unchanged.

Speaker Change: Which includes a headwind of approximately 135 basis points from the 50 <unk> week in 2020 threes results.

Speaker Change: We'll invest in the business to better serve our customers with high return projects to reduce our leverage and return cash to shareholders.

Speaker Change: We now expect total company comparable sales growth of one 2% in 2024 versus 52 weeks in 2023.

Speaker Change: Last week, our board of directors declared a quarterly cash dividend of <unk> 19 per share.

Speaker Change: In closing we are encouraged that our focus area and priorities are resonating with customers driving top line strength and expanding margin.

Speaker Change: As our fiscal 2023 included a 50 <unk> week, we calculate our 2020 for comparable sales growth using a realigned 52 week 2023 period for comparability.

I'd also like to Echo Eric in Pete's comments thinking the teams across the organization for their commitment and dedication to serving our customers as well as wishing everyone a happy holiday season.

Speaker Change: Turning to profitability, we continue to expect a full year EBIT margin in the range of three 6% to 4%.

Speaker Change: We thank you for your interest in Nordstrom, Jamie we are ready for questions. Thank.

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

Speaker Change: Thank you Cathy before we get started with Q&A, we ask that participants please limit themselves to one question and one follow up we'll now move to the Q&A session.

Speaker Change: From an earnings per share perspective, we expect full year results in the range of $1 75 to $2 five excluding the impact of any share repurchases as.

Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Our capital allocation priorities remain unchanged.

Speaker Change: One moment, while we poll for questions.

Speaker Change: We'll invest in the business to better serve our customers with high return projects reduce our leverage and return cash to shareholders.

Speaker Change: And the first question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Speaker Change: Last week, our board of directors declared a quarterly cash dividend of <unk> 19 per share.

Speaker Change: Good afternoon. Thank you for taking our question.

Eric can you speak to the health of the Nordstrom consumer by banner today can you elaborate on the drivers of the slowdown that you saw in late October how have holiday sales trends been performing November quarter to date.

In closing we are encouraged that our focus area and priorities are resonating with customers driving topline strength and expanding margins.

Speaker Change: I'd also like to Echo Eric in Pete's comments thinking the teams across the organization for their commitment and dedication to serving our customers as well as wishing everyone a happy holiday season.

Speaker Change: Hi, Brian.

Speaker Change: Yeah, Let me talk about third quarter.

Speaker Change: First.

Speaker Change: We saw.

Speaker Change: We thank you for your interest in Nordstrom, Jamie we are ready for questions. Thank.

Speaker Change: Good health for our customers across both banners and across income courts, we saw improved spend across all income cohorts healthiest gains within our.

Speaker Change: Thank you Cathy before we get started with Q&A, we ask that participants please limit themselves to one question and one follow up we'll now move to the Q&A session.

Speaker Change: Higher income group.

Speaker Change: As far as.

Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two if you would like to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Q4 slowdown.

We're going to have a lot of information out at it a couple of weeks.

Into the quarter.

Speaker Change: And we just felt like the prudent thing would be to share.

Speaker Change: What we saw which is a decline in trend there.

Speaker Change: It's too early to pull that apart.

Speaker Change: While we poll for questions.

Speaker Change: Great and then as a follow up Kathy as you look ahead, what do you see as the most important drivers of multi year EBIT margin expansion are there any puts or takes we should be considering as you round out 2024 and move into 2025.

Speaker Change: And the first question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Speaker Change: Good afternoon. Thank you for taking our question Eric.

Speaker Change: Eric can you speak to the health of the Nordstrom consumer by banner today can you elaborate on the drivers of the slowdown that you saw in late October how have holiday sales trends been performing November quarter to date.

Good afternoon, Brian first and foremost the topline is always going to be the best contributor for EBIT margin expansion. So we're off to a good start this year.

Speaker Change: Do you think we're north of 4% year to date and topline growth, which is great and that's going to be our biggest contributor to continuing to expand EBIT margin in the future as we've shared in the past as well we've got a little bit of work to do on a couple of areas.

Hi, Brian.

Speaker Change: Yeah, Let me talk about third quarter.

Speaker Change: First.

Speaker Change: We saw.

Speaker Change: Good health for our customers across both banners and across income courts, we saw improved spend across all income cohorts healthiest gains within our.

Speaker Change: Clearly.

Importantly, as we look at move to being an omnichannel retailer, namely supply chain and technology, we want to make sure that we continue to invest there, but make sure that we start to gain the benefits of those investments as well as we move forward those are going to be our biggest opportunities for EBIT expansion and then lastly, I'll just mention it because we.

Speaker Change: Higher income group.

Speaker Change: As far as.

Speaker Change: Q4 slowdown.

Speaker Change: Really drove a lot of information out of it.

Speaker Change: Couple of weeks.

Speaker Change: Into the quarter.

Speaker Change: And we just felt that the prudent thing would be to share.

Speaker Change: What we saw which is a decline in trend there.

Have each quarter.

Speaker Change: Shrink remains at all time highs long term in order for us to get to substantially expanded margins, we're going to need that to come back down.

Speaker Change: It's too early to pull that apart.

We're really pleased with what we've seen with.

Speaker Change: The investments we are making this year and we're starting to see some progress there, but as we've shared before we're at historically high levels I kind of put all three of those things and to EBIT margin expansion.

Oh, good afternoon broke first and foremost the topline is always going to be the best contributor for EBIT margin expansion. So we are off to a good start this year.

Speaker Change: Great. Thank you so much I'll pass it on.

Speaker Change: Okay.

Speaker Change: Next is from Simeon Siegel with BMO capital markets. Please proceed.

Speaker Change: If you think we're north of 4% year to date and topline growth, which is great and that's going to be our biggest contributor to continuing to expand EBIT margin in the future as we've shared in the past as well we've got a little bit of work to do on a couple of areas that are clearly.

Speaker Change: Thanks, everyone and good afternoon.

So really great ongoing rent growth great to hear about the expanding customer count as well just curious how would you characterize new customers versus higher spend per customer Iraq, and then just any way to think about what percent of new customer growth at rack or new customers to the company versus maybe anyone further pivoting from the Nordstrom banner and then if I can just follow up Kathy.

Speaker Change: Importantly, as we moved has moved to being an omnichannel retailer, namely supply chain and technology, we want to make sure that we continue to invest there, but make sure that we start to gain the benefits of those investments as well as we move forward. So those are going to be our biggest opportunities for EBIT expansion and then lastly, I'll just mention it because we.

Speaker Change: Quick color or context, you could share on the receivable growth. Thank you.

Speaker Change: So let me start I'll start and then I'll give you a view.

Speaker Change: Yes.

Speaker Change: Customer health metrics.

Speaker Change: Have each quarter.

Speaker Change: Good we're having customer count growth for having purchased trips growth.

Speaker Change: Shrink remains at all time highs long term in order for us to get to substantially expanded margins, we're going to need that to come back down.

Speaker Change: Across both banners.

Speaker Change: Brian is certainly benefiting from adding new stores.

Speaker Change: New stores, so our biggest source of customer acquisition.

Speaker Change: We're really pleased with what we've seen with the investments we were making this year and we're starting to see some progress there, but as we've shared before we're at historically high levels I kind of put all three of those things add to EBIT margin expansion.

Speaker Change: <unk> to be that.

Speaker Change: Yes.

Speaker Change: Big migration from those new customers.

Speaker Change: They get to know us across both banners in both channels.

Speaker Change: Great. Thank you so much I'll pass it on.

Speaker Change: Could you help us is looking really good.

Speaker Change: Okay.

And the only other thing I would add on that is we did as we shared we saw positive momentum in customers.

Next is from Simeon Siegel with BMO capital markets. Please proceed.

Speaker Change: Thanks, Hi, everyone. Good afternoon.

Speaker Change: <unk> and trips per customer, which are all great metrics to continue to launch and then Simeon I'm sorry, what was your question on receivables in particular.

Speaker Change: So really great ongoing rack growth great to hear about the expanding customer count as well just curious how would you characterize new customers versus higher spend per customer Iraq, and then just any way to think about what percent of new customer growth at rack or new customers to the copy to you versus maybe anyone further pivoting from the Nordstrom banner and then if I could just follow up Kathy.

Speaker Change: I think it looked like they grew maybe a little bit quicker than typical so just any context, there or any color.

Speaker Change: Nothing stands out in particular.

Okay, Great alright, Thanks, a lot guys best of luck for holiday and hope you have a nice Thanksgiving.

Speaker Change: Quick color or context, you could share on the receivable growth. Thank you.

Thank you as well.

Speaker Change: So let me start and I'll start and then I'll give you a view.

Speaker Change: And next is Oliver Chen from TD Cowen. Please proceed.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Customer health metrics.

Hi, Eric Pete and Kathy.

Speaker Change: Good we're having customer count growth, we're having purchased trips growth.

Speaker Change: As we look ahead how are you what does guidance include for promotions and merchandise margins also as we model inventory growth and what are your thoughts on inventory relative to sales growth.

Speaker Change: Across both banners.

Brian is certainly benefiting from adding new stores.

Speaker Change: New stores, so our biggest source of customer acquisition.

Speaker Change: Then finally on the product execution that sounds like a lot of things are working well, which is great. How might you compare and contrast, the rack product execution relative to full line and opportunities you see for category of improvement. Thanks.

Speaker Change: To do that.

Speaker Change: Yes.

Speaker Change: Goodbye accretion from those new customers.

Speaker Change: To get to know us across both banners in both channels.

Speaker Change: Could you help us is looking really good.

Speaker Change: The only other thing I would add on that is we did as we shared.

Speaker Change: However, there is a lot there and good afternoon. Thank you.

Speaker Change: Positive momentum in customers.

Speaker Change: Maybe I'll kick off a little bit I'll start with inventory, but then maybe Pete can talk a little bit about our assortment by banner in the execution. There. We're excited with the progress we keep making and then we can.

Speaker Change: <unk> and trips per customer, which are all great metrics to continue to launch and then Simeon I'm sorry, what was your question on receivables in particular.

I think it looked like they grew maybe a little bit quicker than typical so just any context, there or any color.

Speaker Change: Merch margin question I think is actually a pretty simple one just saw really good strength in rate price sell through.

Nothing stands out in particular.

We shared that I think in our materials and remarks on inventories versus sales, maybe I can start with that one and then I'll turn it over to Pete <unk> Eric.

Speaker Change: Okay, Great alright, Thanks, a lot guys best of luck for holiday and hope you have a nice Thanksgiving.

Speaker Change: Thank you as well.

Speaker Change: And next is Oliver Chen from TD Cowen. Please proceed.

Pete Nordstrom: We always strive to have the rate of sales consistent with the inventory growth I'll just start there we'd like it to be balanced or to have a positive spread of sales over inventory.

Oliver Chen: Hi, Eric and Kathy.

Oliver Chen: As we look ahead how are you what does guidance include for promotions and merchandise margins also as we model inventory growth and what are your thoughts on inventory relative to sales growth.

Speaker Change: It would mean that the inventories are little higher than we want it right now we have shared that with you guys.

Speaker Change: We're working to make sure they were clean as we come out of the quarter, that's really important as we bring in that spring newness coming into next year.

Oliver Chen: Then finally on the product execution that sounds like a lot of things are working well, which is great. How might you compare and contrast, the Iraq project execution relative to full line and opportunities you see for category improvement.

Speaker Change: The inventory growth that we did see is largely to support our rack banner consistent with last quarter. So as we think about the the additional new store openings will always support that with the inventory. We have increased the choice count for rack dot com, which is helping to drive some of its success, but that obviously we want it.

Speaker Change: Oliver there's a lot there and good afternoon. Thank you all.

Speaker Change: Maybe I'll kick off a little bit I'll start with inventory, but then maybe.

Speaker Change: The report that was with inventory as well and then lastly, I would say the inventory quality is good. So we continue to watch the quality of the inventory and the aging and make sure that we are.

Speaker Change: He can talk a little bit about our assortment by banner in the execution. There. We're excited with the progress we keep making and then we can add the merch margin question I think is actually a pretty simple one just saw really good strength in rate price sell through and we shared that I think in our materials and remarks.

Speaker Change: Staying in a really good and healthy place there all of that would say we have inventory for the holidays and we're excited about the next.

Pete Nordstrom: Month, and a half or so I'll turn it over to Pete for an assortment of execution, yes.

Speaker Change: On inventories versus sales, maybe I can start with that one and then I'll turn it over to Pete <unk> Eric.

Pete Nordstrom: Yes.

Pete Nordstrom: Actually it's been pretty darn similar in terms of the categories and how the performance between the rack banner and the Nordstrom banner.

We always strive to have the rate of sales consistent with the inventory growth I'll just start there we'd like it to be balanced or to have a positive spread of sales over inventory.

Pete Nordstrom: We do have nuances to how we apply our merchandise strategies there one consistent theme.

Speaker Change: That would mean that the inventories are a little higher than we want it right now we have shared that with you guys.

Pete Nordstrom: It's been to try to do a better job at investing more in the brands that matter most.

Speaker Change: We're working to make sure that were clean as we come out of the quarter and that's really important as we bring in that spring newness coming into next year.

Pete Nordstrom: Kind of obvious, but theres a bit of a long tail to our assortment at times, if we're not on top of that.

Speaker Change: The inventory growth that we didn't see as largely to support our rock banner consistent with last quarter.

Pete Nordstrom: We've trimmed some of the long tail does help better fund the most important brands and there is a version of that Thats played out in the rack that's worked well.

Speaker Change: As we think about the the additional new store openings will always support that with the inventory we have increased the choice count for rack dot com, which is helping to drive some of its success, but that obviously, we want to support that with inventory as well and then lastly, I would take the inventory quality is good. So we continue to watch the quality of it.

Pete Nordstrom: And as a version of that.

Pete Nordstrom: Full line stores and if you've been in our stores you should be able to see that also the way we're merchandising the signing what have you.

Pete Nordstrom: Hopefully that those top brands are standing out a bit more and we're seeing good performance and the best brands.

Speaker Change: The inventory and the aging and make sure that we're staying in a really good and healthy place. There all of that would say we have inventory for the holidays and we're excited about the next.

Pete Nordstrom: I would say another thing it's been consistently good across both banners is our own product label, which we carry in both places.

Pete Nordstrom: That's been really solid for us double digit increases there what we've been able to do in both instances flare on.

Month, and a half or so I'll turn it over to Pete for a assortment of execution yes.

Pete Nordstrom: Price points that may not be as available for the market to us.

Yes.

Speaker Change: Actually it's been pretty darn similar in terms of the categories and how the performance between the rack banner and the Nordstrom banner.

Lower price points that oftentimes are attracted young customers.

Pete Nordstrom: It's been a good thing to then the last thing I would say it's also.

Speaker Change: We do have nuance to how we apply our merchandise strategies there one consistent theme.

Pete Nordstrom: It is important.

Pete Nordstrom: We don't have this totally nailed, but we're certainly cognizant of it and that's that.

Speaker Change: It's been to try to do a better job.

<unk> for building Assortments online, it's different than it is stores and we know the choice count Super important for the online customer. So we're working on that as well. So I guess, what I would say, it's kind of a long answer to your question is that the work that we've been doing over the last year has been paying off.

Speaker Change: <unk> more than the brands that matter most.

Speaker Change: <unk> kind of obvious, but theres a bit of a long tail to our assortment at times, if we're not on top of it.

We've trimmed some of the long tail to have helped better fund the most important brands and there is a version of that Thats played out in the rack that's worked well and.

Speaker Change: And there is a version of that.

Pete Nordstrom: For us and it's given us I think a lot of confidence in that strategy.

Speaker Change: Our full line stores and if you've been in our stores you should be able to see that also in the way we're merchandising the signing what have you.

Speaker Change: Do you see more of the same for us in the future.

Speaker Change: Hopefully that those top brands are standing out a bit more and we're seeing good performance and the best brands.

Speaker Change: Thanks Happy holidays best regards.

Speaker Change: Thank you Oliver.

Speaker Change: And next is Dana Telsey from the Telsey Advisory Group. Please proceed.

Speaker Change: I would say another thing it's been consistently good across both banners is our own product label, which we carry in both places.

Dana Telsey: Hi, good afternoon, everyone given the improvement in certainly the branded results that you've seen as you think about the categories going forward. How are you thinking about the newness and the categories. Obviously, the activation and the New York store and with focus at rack, how do you see that being additive to the topline.

Speaker Change: That's been really solid for us double digit increases there what we've been able to do in both instances flare on.

Speaker Change: The price points that may not be as available for the market to us.

Speaker Change: Lower price points that oftentimes are attracting young customers.

Dana Telsey: And lastly, just on the margin structure, how youre thinking about puts and takes for the fourth quarter and then the framework for 2025, whether it's on freight rates or levels of pricing this year versus last year. Thank you.

Speaker Change: It's been a good thing to then the last thing I would say is also.

It's important.

Speaker Change: We don't have this totally nail, but we're certainly cognizant of it and that's that the strategy for building Assortments online it's different than it is stores and we know that choice count Super important for the online customer. So we're working on that as well.

Pete Nordstrom: Hi, Dana it's Pete I would say in the categories.

Speaker Change: That's the thing we really thought about most is again the biggest levers.

Speaker Change: I guess, what I would say, it's kind of a long answer to your question is that the work that we've been doing over the last year has been paying off for us and it's given us I think a lot of confidence in that strategy.

Speaker Change: That has to do with the brands, but when you think about relation to categories.

Speaker Change: Women's head to toe and it starts with women's apparel, the womens apparel part of our business has been really healthy this year and I think you've been following US long time, you know that it hasn't been the case.

Speaker Change: Do you see more of the same for us in the future.

Speaker Change: Thanks Happy holidays best regards.

Speaker Change: Last several years and we think we probably have given up some market share. There. So there's been a real concerted effort being thoughtful.

Oliver Chen: Thank you Oliver.

Speaker Change: And next is Dana Telsey from the Telsey Advisory Group. Please proceed.

About constructing our assortments there relative to price some category and what have you.

Dana Telsey: Hi, good afternoon, everyone given the improvement in the certainly the branded results that you've seen as you think about the categories going forward. How are you thinking about the newness and the categories. Obviously, you have the activation and the New York store and with focus at rack, how do you see that being additive to the topline.

Speaker Change: I'd say, probably the toughest issue relative to categories.

Speaker Change: It has been somewhat to do with the unseasonably.

Speaker Change: Warm start to the winter time late fall were not the first.

Speaker Change: Sorry to say this but.

Speaker Change: Got a bit of a slow start on the cold weather categories. That's picked up as <unk> seen the weather change, but thats. The big driver as you would well know in this time of the year. So we keep our eye on that end.

Dana Telsey: And lastly, just on the margin structure, how are you thinking about puts and takes for the fourth quarter and then a framework for 2025, whether it's on freight rates or levels of pricing this year versus last year. Thank you.

Speaker Change: Key to doing that well, it's somewhat goes back to what Cathy talked about that's making sure our inventories are in line with the demand.

Steve: Hi, Dana it's Steve I would tell you the categories.

Speaker Change: And so there's a lot of effort to keep ourselves clean there and to be on top of promotional pricing as well so that we are.

Speaker Change: The thing we've really thought about most is again the biggest levers.

It has to do with the brands, but when you think about relation to categories. It's kind of a women's head to toe and it starts with women's apparel. The womens apparel part of our business has been really healthy this year and I think you've been following us long term.

Speaker Change: We're competitive with the value.

Speaker Change: Talked a little bit about margin structure and to your question around the puts and takes.

Speaker Change: We're not giving 2025 guidance, but the way I would think about the remainder of this year and then as we just I think Holistically think about it first and you had specifically asked around price and freight freight our teams have done a great job of continuing to be back end market with our.

Speaker Change: It hasnt been the case.

Speaker Change: Last several years and we think we've probably given up some market share there. So there's been a real concerted effort being thoughtful.

Speaker Change: About constructing our assortments, there relative to price and category what have you.

Speaker Change: The various freight supplier partners, we have to get great rates and so on.

Speaker Change: I'd say, probably the toughest issue relative to categories.

Speaker Change: We'll continue to manage that they've done a great job all year long on price ultimately, we do know that we would love to see a little bit of the asps starting to come down.

Speaker Change: It has been.

Somewhat to do with unseasonably warm start to the winter time late fall were not the first.

Speaker Change: Sorry to say this but we.

Speaker Change: That's important for customers as well and so.

Speaker Change: We got a bit of a slow start on the cold weather categories.

Speaker Change: Continuing to work on that but we're going to see a mix change.

Speaker Change: Picked up as <unk> seen the weather change, but that's a big driver as you would well know in this time of the year. So we keep our eye on that and.

Speaker Change: Changed a little bit as we continue to grow rack rack has a lower average price point than the Nordstrom manner.

Speaker Change: It's a good thing too, but we'll just continue to see a little bit of mix I would say all of that I take into we run a portfolio and we always try to balance to make sure that first and foremost serving what our customers want.

Speaker Change: Key to doing that well, it's somewhat goes back to what Cathy talked about that's making sure our inventories are in line with the demand.

Speaker Change: So there's a lot of effort to keep ourselves clean there and to be on top of promotional pricing as well so that we are.

Speaker Change: Dan I'll take the rack focused question that's totally focused in store fulfillment go together and we've rolled that out to 100 stores to start with.

We're competitive with the value.

Speaker Change: <unk> talked a little bit about margin structure and to your question around the puts and takes.

Speaker Change: For both of those services to be good for our customers inventory accuracy is paramount.

Speaker Change: Obviously, we're not giving 2025 guidance, but the way I would think about the remainder of this year and then as we just I think Holistically think about it firsthand you specifically asked around price and freight freight our teams have done a great job continuing to be back end market with our <unk>.

Speaker Change: Our multiyear investment in RFID.

Speaker Change: The big enabler to us.

Speaker Change: Hello to open up at inventory store inventory for a customer that shopping online.

Speaker Change: The various freight supplier partners, we have to get great rates. So we will continue to manage that they've done a great job all year long on price ultimately, we do know that we would love to see a little bit of the Asps is starting to come down.

Buffy a path that those capabilities in our northern Nevada for a number of years.

Speaker Change: We've seen the impact of that.

Speaker Change: Both sales.

Speaker Change: Its margin.

Partly it's a better customer experience, particularly in the off price you get down to there's onesies and twosies.

Speaker Change: Important for customers as well and so we'll continue to work on that but we're going to see a mix.

Speaker Change: A lot of those items.

To shop.

Speaker Change: Changed a little bit as we continue to grow rack rack has a lower average price point than the Nordstrom manner.

Speaker Change: Those ones and twos and a lot of times, that's clearance to be able to do it online.

Speaker Change: And that's a good thing too, but we will just continue to see a little bit of mix I would say all of that I take into we run a portfolio and we always try to balance to make sure that were first time with pharma, serving what our customers want.

Speaker Change: For many customers.

A more convenient way of shopping.

Speaker Change: Clarence.

Speaker Change: To offer that.

Speaker Change: Inventory up online is we think a big deal.

Speaker Change: David I'll take the rack forward question is totally focused on store fulfillment go together and we've rolled that out to 100 stores to start with.

Speaker Change: It will help our sales that will help our margin.

Speaker Change: And allow us to serve more customers.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: For both of those services can be good for customers inventory accuracy is paramount.

Speaker Change: Okay.

Speaker Change: And next is Alex straightened with Morgan Stanley. Please proceed with your question.

Speaker Change: Our multiyear investment in RFID is really the big enabler to us being able to open up at inventory store inventory for a customer thats shopping online.

Thanks, a lot for taking the questions just a couple from me one is just.

Speaker Change: How your fourth quarter view has changed compared to when we spoke a few months ago. It seems like it's a little bit more negative I think primarily on sales, but if you could elaborate on that and then secondly, just on the inventory levels.

Speaker Change: Bob do you have that those capabilities at our northern Nevada for a number of years we've.

We've seen the impact of that.

You noted they are a little bit higher than you hoped is that concentrated in certain categories or in certain banners are or is there any way you can unpack that a little bit more from a for us. Thanks a lot.

<unk> sales.

Speaker Change: Its margin support.

Speaker Change: It's a better customer experience, particularly in off price, we get down to there's onesies and twosies.

Speaker Change: Good afternoon, Alex with regards to Q4.

Speaker Change: A lot of those items.

Speaker Change: To shop.

First I'll start with we're really pleased with Q3 that continue.

Speaker Change: Hi.

Speaker Change: Those ones and twos and a lot of times, that's clearance to be able to do it online.

<unk>, we've seen in the business across both banners and our year to date performance, so starting there, but as Eric mentioned.

For many customers.

Speaker Change: A more convenient way of shopping.

Speaker Change: Clearance items.

Given the slowdown we saw.

Speaker Change: To offer that.

Speaker Change: Part of October.

Speaker Change: Inventory up online is we think a big deal and it will help our sales that will help our margin.

Speaker Change: We just think it's prudent to take a little bit more of the.

Speaker Change: Cautious outlook.

Speaker Change: Q4 is big and our business as you know in all of retail it it's almost 40% of the profits and about 30% of the sales. So we just wanted to be prudently cautious the way I think about.

Speaker Change: And allow us to serve more customers.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: And next is Alex straighten with Morgan Stanley. Please proceed with your question.

The holiday, there's a lot still in front of us.

Speaker Change: Thanks, a lot for taking the question just a couple from me one is just how your fourth quarter view has changed compared to when we spoke a few months ago. It seems like it's a little bit more negative I think primarily on sales, but if you could elaborate on that and then secondly, just on the inventory levels.

Speaker Change: And then on inventory levels.

Speaker Change: It's heavier as I said to support the rack business and then I would say I would call out cold weather categories.

No secret that it was unseasonably warm for a little bit. The good news is that the weather has turned a little bit and that always helps.

Speaker Change: You noted there are a little bit higher than you hoped is that concentrated in certain categories or in certain banners or is there any way you can unpack that a little bit more from a for us. Thanks a lot.

Pete Nordstrom: Cold weather categories, and then PR, if you'd add anything to that.

Speaker Change: No I think thats right.

Speaker Change: We look at the aging of our inventory, which is really healthy and good.

Speaker Change: Good afternoon Alex.

Speaker Change: Improved so it's not really that it's just the sheer quantity I think Cathy is right. It has to do.

Speaker Change: With regards to Q4 first I'll start with we're really pleased with Q3 the continued.

Speaker Change: With the handful of weeks, where we had some.

Speaker Change: The strength, we've seen in the business across both banners and our year to date performance so starting there but.

Speaker Change: Selling of booths, outerwear, and sweaters and you know.

Speaker Change: We're trying to claw that back as best we can the remainder of the season.

Speaker Change: As Eric mentioned, given the slowdown we saw.

Speaker Change: Part of October.

Speaker Change: At the end of the time, if theres going to be risk to any certain categories, that's probably where it's going to be.

Just think it's prudent to take a little bit more of a cautious outlook Q.

Speaker Change: Thanks, so much good luck.

Speaker Change: Thank you.

Speaker Change: Next is Tracy Kogan with Citigroup. Please proceed.

Thank you I had a question on your gross margin I think you said it was driven by better full price selling and I was just wondering if that was.

Speaker Change: And then on inventory levels.

Speaker Change: It's heavier as I said can support the rack business and then I would say I would call out cold weather categories.

Speaker Change: Pretty consistent across both divisions or if one really led versus the other and then overall on gross margin was this above your expectations for the quarter and how are you looking at the fourth quarter.

Speaker Change: No secret that it was unseasonably warm for a little bit. The good news is that the weather has turned a little bit and that always helps.

Speaker Change: In terms of the promotional environment and what Youre looking at for gross margin. Thanks.

Cold weather categories, and then Pete I don't know.

Speaker Change: One thing to that.

Speaker Change: No I think Thats right I mean, we look at the aging of our inventory, which is really healthy and good.

Speaker Change: So far in Q3, this 50 basis points that we called out.

Speaker Change: Was really was driven by the strength of Reg price selling.

Speaker Change: Proved so it's not really that is just the sheer quantity I think Cathy it's right. It has to do.

Speaker Change: Nothing to call out versus banner little bit stronger in Nordstrom banner.

Speaker Change: With the handful of weeks, where we had suppressed selling their booths outerwear and sweaters.

Speaker Change: Our year over year.

Speaker Change: Not not anything that I would have noted in particular.

Speaker Change: We're trying to claw that back as best we can the remainder of the season.

Speaker Change: And then on the Q4 <unk>.

Speaker Change: At the end of the time, if theres going to be risk to any certain categories, that's probably where it's going to be.

Speaker Change: Consistent with the guidance, we've given are the holding of the guidance we have.

Speaker Change: All of these.

Speaker Change: Thanks, so much good luck.

Speaker Change: Some good improvement year over year, and gross margin and gross profit.

Speaker Change: Thank you.

Speaker Change: And that's what you should expect obviously, but we are expecting to see some improvement year over year.

Speaker Change: Next is Tracy Kogan with Citigroup. Please proceed.

Tracy Kogan: Thank you I had a question on your gross margin I think you said it was driven by better full price selling and I was just wondering if that was pretty consistent across both divisions or if one really led versus the other and then overall on gross margin was this above your expectations for the quarter and how are you looking at.

Speaker Change: And what's your view on the promotional environment currently I think shaping up for holiday.

Q4 is always promotional and for our retailers I think we'd like to.

Stop it is and.

Speaker Change: So far it has lived up to our expectations.

Speaker Change: Great. Thank you guys.

Tracy Kogan: The fourth quarter.

Tracy Kogan: In terms of the promotional environment and what Youre looking at for gross margin. Thanks.

Speaker Change: And next is Blake Anderson with Jefferies. Please proceed.

Speaker Change: So far in Q3, this 50 basis points that we called out.

Blake Anderson: Hi, Thanks for taking our question. So I might have missed this but wanted to see if you could comment on just traffic at each of the banners and then <unk>.

Speaker Change: Was really was driven by the strength of Reg price selling.

Nothing to call out versus banner little bit stronger in Nordstrom banner.

Blake Anderson: <unk> on rack so at the new rack stores was curious the customers that these stores are you seeing any incremental types of customer show up then maybe it wasn't showing up on your previous rack.

Speaker Change: Year over year, but not not anything that I would have noted in particular.

Speaker Change: And then on Q4.

Blake Anderson: <unk> stores, just curious how these new customers are shopping across categories and how they are versus your current customers.

Speaker Change: Consistent with the guidance, we've given or the holding of the guidance we have still have the.

Speaker Change: Some good improvement year over year and gross margin gross profit and that's what you should expect obviously, but we are expecting to see some improvement year over year.

Blake Anderson: I'll start with with traffic and then obviously compete and help with regards to traffic traffic was up.

Blake Anderson: The banners.

Blake Anderson: Conversion was about flat.

Speaker Change: And what's your view of the promotional environment currently is it shaping up for holiday.

Blake Anderson: And across both banners as well as Eric I think shared earlier really pleased with the continued growth in transactions as well.

Speaker Change: Q4 is always promotional for a retailer I think we'd like to because that has stopped but it is and.

Blake Anderson: And then customers at the rack.

Blake Anderson: Alright.

Speaker Change: So far it has lived up to our expectations.

Blake Anderson: Larry.

What are the real differences are two banners that business.

Great. Thank you guys.

Blake Anderson: Our notion stores to draw from a much bigger geographic area as people will drive.

Speaker Change: And next is Blake Anderson with Jefferies. Please proceed.

Blake Anderson: Our two especially our big flagship stores and off price.

Blake Anderson: Hi, Thanks for taking our question. So I might've missed this but wanted to see if you could comment on just traffic each of the banners and then <unk>.

Blake Anderson: It's about 15 minutes of convenience really matters.

Blake Anderson: That treasure hunt in person.

Blake Anderson: On rack so at the new rack stores was curious the customers that these stores are you seeing any incremental type of customer show up that maybe it wasn't showing up on your previous rack.

Blake Anderson: Serving customers is very vital and off price business. So theres, just a lot of opportunity for us to to serve customers.

Blake Anderson: In.

Blake Anderson: Geographies, where we have stores are filling in and some new geographies.

Blake Anderson: <unk> stores, just curious how these new customers are shopping across categories and how they are versus your current rack customers.

Blake Anderson: I would say the customers.

Blake Anderson: Pretty similar.

Blake Anderson: Listing customers, who have an <unk>.

Particular, our space.

Speaker Change: I'll start with with traffic and then obviously, Eric and team can help with regards to traffic traffic was up.

Blake Anderson: And off price.

Blake Anderson: It's really these brands.

Blake Anderson: The offer brands that we have the depth and these brands brands that customers associate with Nordstrom the nausea, Brad.

Speaker Change: Ross the banners.

Speaker Change: Conversion was about flat.

And across both banners as well as Eric I think shared earlier are really pleased with the continued growth in transactions as well.

Blake Anderson: <unk> is unique in.

Blake Anderson: And the more we believed into those brands are better our business is that.

Blake Anderson: Certainly prices are portfolio I would say.

Speaker Change: And then customers at the rack.

Blake Anderson: Contrast to some other off price retailers.

Speaker Change: I'm sorry.

Speaker Change: Larry.

Blake Anderson: We lead with brand followed by price real quickly and I think others lead with price.

Speaker Change: What are the real differences are two banners for business.

Blake Anderson: First and so our average price points are higher then.

Speaker Change: Our notion stores to draw from a much bigger geographic areas that will drive.

Blake Anderson: Some of it could take off price players.

Speaker Change: Got it.

Speaker Change: Our two especially our big flagship stores and off price.

Speaker Change: Brands really resonate with customers as we opened new stores.

Speaker Change: It's about 15 minutes of convenience really matters.

Speaker Change: Very clear thanks, so much.

Speaker Change: That treasure hunt in person.

Speaker Change: And next is Chuck Grom with Gordon Haskett. Please proceed.

Speaker Change: Serving customers is.

Speaker Change: Vital and off price business. So theres, just a lot of opportunity for us to to serve customers.

Hey, Thanks, very much great results.

Near term question one longer term on the near term I was hoping we could just double click on the on the slowdown here in the past few weeks, it's counter to what we've heard from a lot of other retailers I guess.

Speaker Change: And.

Speaker Change: Charter piece, where we have stores are filling in and some new geographies.

Speaker Change: I would say the customers.

Speaker Change: Pretty similar.

Speaker Change: The question is is it across all banners both the rack.

Speaker Change: Listing customers, who have an <unk>.

Speaker Change: Particular, our space.

Speaker Change: On the full line stores is there any geographic concentrations any categories to talk about and then the rack. It sounds like 20 to 25 stores is how we should be thinking about the model. How do we think about the longer term prospects for for store growth and ultimately where that can grow obviously your you.

Speaker Change: And off price.

Speaker Change: It's really these brands.

Speaker Change: The offer brands that we have the depth of these brands brands that customers associate with Nordstrom the nausea, Brad.

Speaker Change: <unk> is unique in.

Speaker Change: And the more we believed into those brands are better our business is that okay.

Speaker Change: Far underpenetrated relative to some of the off price peers.

Speaker Change: Certainly prices are important but I would say.

Speaker Change: So how are we thinking about the opportunity for the rock. Thank you.

Speaker Change: Contrast to some other off price retailers.

Speaker Change: Thanks Chuck.

Speaker Change: We lead with brand followed by price real quickly and I think others lead with price.

Speaker Change: Again, the Q4 slowdown Thats a couple of weeks in so.

Speaker Change: Tough to us to go deep on that but.

Speaker Change: And so our average price points are higher than some.

Speaker Change: Some of them are price players.

Speaker Change: I'd say it's been.

Speaker Change: General across all of our businesses.

Speaker Change: But it's those brands really resonate with customers as we opened new stores.

Speaker Change: That we saw.

Speaker Change: Slowing and the trends in some of our Q3 results.

Speaker Change: Very clear thanks, so much.

Speaker Change: We had really good.

Speaker Change: Sales trends across all of our businesses in Q3.

Speaker Change: And next is Chuck Grom with Gordon Haskett. Please proceed.

Speaker Change: We saw slowdown starting that last week of October.

Very much great results one near term question one longer term on the near term I was hoping we could just double click on the on the slowdown here in the past few weeks, it's counter to what we've heard from a lot of other retailers I guess.

Speaker Change: It's noise I would say that's true it's very noisy for a few obvious reasons. One is the calendar doesn't match up with last year. So planning the business with five fewer days between Thanksgiving and Christmas is challenged.

Speaker Change: The question is is it across all banners, both rack and full line stores is there any geographic concentrations any categories to talk about and then the rack.

Speaker Change: There is the weather impact as Pete mentioned, there's no doubt we've seen some of that.

Speaker Change: It sounds like 20 to 25 stores is how we should be thinking about the model. How do we think about the longer term prospects for for store growth and ultimately where that can grow obviously your.

Plenty of election noise.

Speaker Change: Our customers appear to be distracted for some time there.

Speaker Change: So you add all that together.

Speaker Change: Youre far underpenetrated relative to some of the off price peers.

Speaker Change: Hi.

Right.

Speaker Change: We really haven't.

Speaker Change: So how are we thinking about the opportunity for the rock. Thank you.

Speaker Change: Any conclusions on that.

Speaker Change: We've seen a slowdown in I'll.

Thanks Chuck.

Speaker Change: I will say that the majority of the holiday seasons in front of US we feel really great about our inventory position our holiday plans our gifting assortment.

Speaker Change: Again, the Q4 slowdown it's a couple of weeks.

Speaker Change: Tough to us to go deep on that but.

Speaker Change: And there's plenty of time to us to deliver great results, there, but so far it's a little slower than we exited Q3.

Speaker Change: I'd say it's been.

Speaker Change: General across all of our businesses.

Speaker Change: That we saw.

Speaker Change: A slowing in the trends in some of our Q3 results.

Speaker Change: Chuck I'll answer maybe a little bit on rack stores to your point and so we haven't necessarily guided into next year, but 20 to 25 stores.

Speaker Change: We had really good us.

Speaker Change: Sales trends across all of our businesses in Q3.

Speaker Change: In each year is a pretty good assumption I think for modeling purposes.

Speaker Change: We saw slowdown starting about last week of October.

Speaker Change: The thing on longer term growth prospects exactly as you said, we are under penetrated and we still see ample opportunity to continue to put.

Speaker Change: Some new rack stores and <unk>.

Speaker Change: In the areas, where we have customers that would love to shop.

Speaker Change: So far so we do see a fair amount of opportunity for continued growth.

Speaker Change: There is a weather impact as Pete mentioned, there's no doubt we've seen some of that.

Speaker Change: Great. Thank you.

Speaker Change: Plenty of election noise.

Speaker Change: Our customers appear to be distracted for some time there.

Okay.

Speaker Change: And our last question comes from Lorraine Hutchinson with Bank of America. Please proceed.

Speaker Change: So you add all that together.

Hi.

Speaker Change: Yes.

Speaker Change: Hi, This is melanie on for Lorraine.

Speaker Change: We really haven't.

Speaker Change: Any conclusions on that.

Speaker Change: As we look out over the next few years at what comp you get leverage on the SG&A line. Thank you.

Speaker Change: We've seen a slowdown in I'll.

Speaker Change: I will say that the majority of the holiday seasons in front of US we feel really great about our inventory position our holiday plans our gifting assortment.

Speaker Change: It's really a mixture melanie the rack growth, obviously is going to help.

And there is plenty of time to us to deliver great results, there, but so far it's a little slower than we exited Q3.

Speaker Change: For the top line growth just with the continued expansion of new stores.

Speaker Change: Strong banner.

Speaker Change: Chuck I'll answer maybe a little bit on rack stores to your appointment we haven't necessarily guided into next year, but 20 to 25 stores.

Speaker Change: If you imagine a 2% to 3% type inflation wireless youre going to need to have comps and a zero to one or so probably more like one to be able to get leverage.

Speaker Change: <unk> features a pretty good assumption I think for modeling purposes.

Speaker Change: Thank you.

Speaker Change: The other thing on longer term growth prospects exactly as you said, we are under penetrated and we still see ample opportunity to continue to put.

Speaker Change: Alright, we want to thank you for joining today's call.

Speaker Change: A replay along with our slide presentation and prepared remarks will be available for one year on our website. Thank you for your interest in Nordstrom.

Some new rack stores and in areas, where we have customers that would love to shop.

Speaker Change: Okay.

<unk>. So we do see a fair amount of opportunity for continued growth.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Great. Thank you.

Speaker Change: Okay.

Speaker Change: And our last question comes from Lorraine Hutchinson with Bank of America. Please proceed.

Speaker Change: Hi, This is melanie on for Lorraine.

Speaker Change: As we look out over the next few years at what comp you get leverage on the SG&A line. Thank you.

Speaker Change: It's really a mixture melanie the rack growth, obviously is going to help.

For the topline growth just with the continued expansion of new stores.

Speaker Change: <unk> banner.

Speaker Change: If you imagine a 2% to 3% type inflation wireless youre going to need to have comps and a zero to one or so probably more like one to be able to get leverage.

Speaker Change: Thank you.

Speaker Change: Alright, we want to thank you for joining today's call.

Speaker Change: A replay along with our slide presentation and prepared remarks will be available for one year on our website. Thank you for your interest in Nordstrom.

Speaker Change: Yeah.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Speaker Change: [music] <unk>.

Speaker Change: Greetings and welcome to the Nordstrom third quarter 2024 earnings Conference call. At this time all participants are in a listen only mode. We will begin with prepared remarks, followed by a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, if anyone should require operator assistance during the conference. Please press <unk>.

Speaker Change: <unk> zero on your telephone keypad.

Speaker Change: And as a reminder, this conference is being recorded.

Speaker Change: At this time I'll turn the call over to Jamie <unk> head of Investor Relations for Nordstrom.

Speaker Change: You may begin.

Speaker Change: Good afternoon, and thank you for joining us 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 Dot com. Our discussion may include forward looking statements. So please refer to the slide with our Safe Harbor language.

Speaker Change: 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 third 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 reconciliations to the most directly comparable GAAP measures can be found in our Q3 2024 earnings press release, which is available on our website.

Speaker Change: As we begin I want to acknowledge the company's prior announcements regarding the board of directors exploration of potential avenues to enhance shareholder value. The formation of a special committee to evaluate any proposal that might be presented by members of the Nordstrom family to take the company private and the receipt of such proposal on Sept.

Speaker Change: Timber third we will not be commenting on this topic or speaking to this matter during our call today I will now turn the call over to Eric.

Eric: Thank you Jamie and good afternoon, everyone. Thanks for joining us today.

Eric: I'll start with our third quarter performance and discuss the progress we have made against our three priorities and finish with some comments on the current retail environment.

In the third quarter, our efforts to enhance the customer experience continued to resonate enabling growth in net and comparable sales margin expansion and an increase in our customer base.

Eric: We delivered solid results with net sales, reaching over $3 3 billion along with earnings per share of <unk> 33.

Eric: Both Nordstrom and Nordstrom rack delivered 4% comparable sales growth.

Eric: We're particularly encouraged that our online business sustained its momentum with digital sales growth of over 6%.

Eric: Customers responded to newness in our selection of the brands that matter most to them.

Eric: Raving positive total company net sales growth for the fourth consecutive quarter.

Eric: Moving onto our three priorities for the year of driving Nordstrom banner growth operational optimization and building on the momentum at the rack.

Eric: Driving Nordstrom banner growth is a key part of our strategy and we continue to make progress during the third quarter.

Eric: A curated selection of merchandise with greater depth and our customers' favorite brands across our fleet and not just in our largest stores helped drive the results as.

Eric: As an omnichannel retailer, we have to be prepared to serve customers, when where and how they want to shop and services always our number one priority.

Eric: Our customers define what good service is not us and our teams are very focused on taking care of each and every customer who shop with us.

Eric: Take this commitment to serving our customers seriously from the initial greeting to providing assistance and our point of view at the fitting room to completing the sale.

Eric: For our customers that prefer to shop online, we aimed to make the experience seamless and engaging through technology.

Eric: At <unk> Dot Com net sales growth in the third quarter was supported by the enhancements to the search and discovery functionality on our site and in our apps as well as improvements in our assortment, especially have items under $100 in price.

Eric: We continued to scale our marketplace business in the third quarter, which now has over 300 sellers offering a wide selection to our customers.

We look forward to continuing to grow this business in 2025 and beyond.

Eric: Another key priority for this year is operational optimization.

Eric: Given the progress our supply chain team has made on reducing operating expenses. They have expanded their focus to increasing speed by quickly getting orders to our customers' doorsteps and moving product efficiently through our network to provide relevance and freshness.

Eric: We know our customers desire speed, which can improve the customer experience as well as our financial outcome.

Eric: For example, faster fulfillment and delivery of items drove an over 40% improvement in the speed of customer returns in the third quarter.

Eric: Throughout the year the supply chain team's efforts have also supported our new rack store openings successfully more.

Eric: More recently, they have positioned us well heading into holiday in terms of inventory flow staffing and shipping capacity.