Nordstrom, Inc.

Greetings, and welcome to the Nordstrom Second 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 Q&A session. If you would like to ask questions, 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 Jamie Dewis, Head of Investor Relations for Nordstrom. Jamie?

Good afternoon, and thank you for joining us today. Before we begin, I want to mention that we'll be referring to slides which can be viewed in the Investor Relations section on nordstrom.com. Our discussion may include forward-looking statements, so please refer to the slide with our Safe Harbor language. Participating in today's call are Eric Nordstrom, Chief Executive Officer of Pete Nordstrom, President, and Kathy Smith, Chief Financial Officer, who will provide a business update and discuss the company's second quarter performance. Please note that when discussing our results and outlook, we will be referring to them on an adjusted basis for EBIT, EBIT margin, and earnings per share. Reconciliations to the most directly comparable gap measures can be found in our Q2 2024 earnings press release, which is available on our website. As we begin, I want to acknowledge the company's April 18th announcement of the board of directors exploration of potential avenues to enhance shareholder value and formation of a special committee to evaluate any proposal that might be presented by Eric and Pete Nordstrom to take the company private. The special committee will carefully evaluate any proposal that may be received and consider whether it is in the best interest of Nordstrom and all shareholders. We do not have an update to share on this topic and will not be speaking to it during our call today. I'll now turn the call over to Eric.

Thank you, Jamie, and good afternoon, everyone. Thank you for joining us today. I'll begin with our second quarter performance. We delivered solid results in the second quarter with net sales of 3.8 billion and earnings per share of 96 cents. We grew net sales as well as comparable sales and expanded margins. At both Nordstrom and The Rack, customers responded positively to newness and their favorite brands. The momentum in our digital business continued, with net sales growth of 6%. Our teams executed well throughout the quarter and delivered a successful anniversary sale. We are pleased that our efforts are resonating with customers. During the second quarter, we made progress on our three key priorities of driving Nordstrom Banner growth, optimizing our operations, and building upon the momentum at the rack. Driving Nordstrom banner growth is a key area of focus. For us, it all begins with helping our customers feel good and look their best. We do this by offering a compelling selection of great merchandise supported by our commitment to service and experience. In our Nordstrom stores, we continued our efforts to provide a more consistent offering of the brands that matter most to our customers across our entire fleet. This includes ensuring that we have the newness, relevance, and depth of merchandise that our customers value, including our Nordstrom private brands, which were relaunched earlier this year. As we have shared previously, growing the digital customer journey is a key part of our strategy to drive Nordstrom banner growth. In the second quarter, solid sales growth at Nordstrom.com was driven by an increase in our assortment across a balance of price points, improvements to search and discovery, as well as high in-stock rates of our fastest turning items. In April, we successfully launched our Marketplace and have since added over 15,000 items to our digital offering and nearly 100 new brands. While we're pleased with the initial response from our customers, Marketplace is not yet a material driver and we will continue to scale it in the months ahead. Operational optimization is another key priority for 2024, which is intended to further build upon the success we've had in optimizing our supply chain operations to serve customers with increased speed and reliability while lowering costs. Our business is driven by newness. Consistent inventory flow ensures we have the right product at the right time for our customers. Our teams have made a lot of progress in this area, which helped drive the success at both banners in the second quarter. At the Nordstrom banner, consistent flows drove regular price sales, including during the anniversary sale. We also processed inbound merchandise and returns faster, enabling freshness in all channels. And even with the volume of the anniversary sale, the rack had a steady flow of fresh merchandise throughout the quarter, which contributed to its high single-digit sales growth. We have also made progress on implementing RFID technology across our locations. RFID enables faster, real-time inventory data, helping us to improve the accuracy of our inventory. Not only does this technology provide us with new insights to improve product flow and reduce shrink, inventory accuracy enhances the customer experience, allowing us to fulfill the items our customers are looking for. During the second quarter, we made the strategic decision to cease build-out and planning of a leased omni-channel center intended for future use in the Pacific Northwest. Logistics networks have recovered from the supply chain challenges that began during the pandemic, and we've improved our supply chain operations over the last few years. We found that we can serve West Coast customers more efficiently from our existing supply chain network, while avoiding additional costs to build out the facility. Therefore, we have taken an asset impairment charge that is reflected in our results. Turning now to our priority to build on our momentum at the RAC. During the second quarter, we opened five new RAC stores, bringing our year-to-date total to 11. We're planning to open 12 more new RAC stores this year ahead of the holiday season. Financial results continue to be strong at the RAC banner. RAC stores that were opened last year are performing well, delivering a solid return on investment while attracting new customers. The RAC banner's digital business is a differentiator in off-price retail. enabling our customers to shop when and how they want. We've built and refined industry-leading digital capabilities at Nordstromrack.com, which delivered strong results in Q2. An expanded merchandise offering of great brands at great prices, combined with a focus on in-stock rates, drove the results. In summary, we are pleased with our second quarter results and the direction we are heading. In the quarter, we grew sales and expanded margins. our teams executed a successful anniversary sale, and we made progress on our key priorities. This progress, along with our results, provide us with confidence in our full-year guidance. And with that, I'll turn it over to Pete.