Nordstrom, Inc.

Greetings, and welcome to the Nordstrom first quarter 2021 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'd like to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. At this time, I'll turn the call over to Michael Mayer, Chief Accounting Officer for Nordstrom. You may begin.

Good afternoon, and thank you for joining us. Today's earnings call will last 45 minutes and will include approximately 30 minutes for your questions. 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 the slides with our safe harbor language. Participating in today's call are Eric Nordstrom, Chief Executive Officer, and Anne Braman, Chief Financial Officer, who will provide a business update and discuss the company's first quarter performance. Joining during the Q&A session will be Pete Nordstrom, President of Nordstrom, Inc., and Chief Brand Officer. And now I'll turn the call over to Eric.

Good afternoon, and thank you for joining us today. We're pleased with our results in the first quarter, which were marked by improving sales momentum and continued progress in our transformation as we work to unlock the full potential of our digital-first platform. As demand continues to recover, our unique product offering and connection to our customers place us in a strong position to capitalize on this opportunity, and we are confident in our ability to capture market share and drive profitable growth as consumers resume activities, including social events, travel, and return to work. Our top-line trends increased sequentially for the third quarter in a row. With improvements in both Nordstrom and Nordstrom Rack, supported by recovery in stores as COVID restrictions were lifted and continued growth in digital. Sales trends reflected broad-based improvement across businesses, regions, and merchandise categories, both in-store and online. Stores and markets that have opened up earlier outperformed other markets by 7 to 10 percentage points, giving us increasing optimism about the pace of recovery as we look to the remainder of the year. Our performance in the quarter reflects solid execution toward the growth priorities we laid out at our investor day in February. Win in our most important markets, broaden the reach of Nordstrom Rack, and increase our digital velocity. Starting with our priority to win in our most important markets, our market strategy helps us engage with customers through better service and greater access to product, no matter how they choose to shop. We successfully expanded the rollout to 10 new markets, including Atlanta, Houston, Detroit, and Minneapolis over the last three months. Market strategy is now in place in all of our top 20 markets, bringing an unmatched level of convenience and connection to customers who make up about 75% of our sales. We continue to scale the enhanced capabilities we launched in 2020, like the expansion of order pickup and ship-to-store to all Nordstrom Rack stores, with order pickup more than doubling compared to the first quarter of 2019. In addition, nearly one-third of next day order pickup volume for Nordstrom.com in our top 20 markets was picked up at rack stores since launch, as we continue to integrate our capabilities across our two powerful brands. We also continue to evolve our approach to get closer to our customers than ever before. This quarter, we made significant progress expanding our personalized styling programs with new tools deployed in the first quarter to allow our salespeople to offer our customers highly relevant recommendations both in-store and digitally. More than 50% of our salespeople are now utilizing these remote styling tools, a 10 percentage point increase compared to just a quarter ago. We also introduced new live stream shopping events featuring some of our best brands, We delivered significant growth from these initiatives in the quarter and are on pace to meet our milestones for the year. Our second growth priority is broadening the reach of Nordstrom Rack. In the quarter, total rack sales declined 13% to 2019, a 10 percentage point sequential improvement from the fourth quarter. Importantly, the merchandise repositioning across price, hybrid, and brand doors is progressing. in spite of some challenges managing slower than anticipated inbound inventory flow. We remain in the early innings in these initiatives, and our progress is encouraging. Increased customer choice of price-oriented offerings in kids, home, and active supported a 37% increase in sales compared to 2019 in these categories. With respect to our priority to increase our digital velocity, we maintained strong growth at norsham.com and norshamrack.com in the first quarter, even as store traffic and sales rebounded with increased mobility. Digital sales increased 23% over the last year and 28% over the first quarter of 2019. With continued growth in digital, our total penetration has increased by 15 percentage points over the past two years to 46%. Our Nordstrom and Nordstrom Rack apps continue to be powerful drivers of customer engagement. During the quarter, we generated over a million downloads of our apps, a more than 50% increase over the first quarter of 2019. Mobile customers, including app users, represented approximately 75% of total digital traffic and two-thirds of total digital sales for the quarter. Looking ahead, we continue to enhance our digital capabilities to improve the customer experience across the shopping journey. One of the key opportunities we see is to offer our customers more choices, with plans to increase choice count to approximately 1.5 million over the next several years. This quarter, we saw ramping benefits from this initiative, with choice count increasing approximately 20% versus 2019, primarily driven by an expanded dropship assortment in both our core categories and in-demand categories like home, active, and kids. This allowed us to drive strong sales growth in our digital business without a corresponding increase in our inventory investment. We've also seen continued strong improvement in conversion, which was up more than 15% compared to 2019. We continue to deliver exciting product for our customers with some of the brands that matter the most to them through launches like our pop-in with SKIMS and new concept shop featuring Fear of God. As we look ahead to the second quarter, we believe that our anniversary sale will be well-timed to benefit from customers' increasing confidence and return to pre-pandemic activities. The event will also mark a significant step forward in the transformation of our approach to getting closer to you. Our goal is to have an event that rewards and engages our best customers with a superior shopping experience. We are building on last year's launch of a digital catalog with personalized editorial content and product recommendations, while adding new virtual and in-store events. We will also significantly increase selection for anniversary this year, with total customer choices up double digits compared to 2019, supported by an expansion of alternative partnership models with our vendors. To ensure that we are best positioned to support our anniversary sale, we are also working with our vendors to accelerate product receipts, which Ann will talk about shortly. Overall, we are very excited about our offering and our approach to anniversary, which remains an important opportunity for us to provide a one-of-a-kind experience for our loyalty customers while introducing new customers to Nordstrom. In closing, coming out of the first quarter, our focus on accelerating our strategic priorities to serve customers in new and differentiated ways is gaining momentum. We are in a stronger position than ever to capitalize on our market share opportunity as customer demand recovers. We're confident in our direction and look forward to sharing our continued progress in the quarters ahead. With that, I'll turn it over to Ann to discuss our financial results in greater detail.