Nordstrom, Inc.

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 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. And 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. 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.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, Pete Nordstrom, President, and Kathy 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 gap 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 on September 3rd. We will not be commenting on this topic or speaking to this matter during our call today. I'll now turn the call over to Eric.

Thank you, Jamie, and good afternoon, everyone. Thanks for joining us today. I'll start with our third quarter performance, then 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. We delivered solid results with net sales reaching over 3.3 billion, along with earnings per share of 33 cents. Both Nordstrom and Nordstrom Rack delivered 4% comparable sales growth. We're particularly encouraged that our online business sustained its momentum with digital sales growth of over 6%. Customers responded to newness in our selection of the brands that matter most to them, driving positive total company net sales growth for the fourth consecutive quarter. Moving on to our three priorities for the year of driving Nordstrom Banner growth, operational optimization, and building on the momentum at the rack. Driving Nordstrom Banner growth is a key part of our strategy, and we continue to make progress during the third quarter. A curated selection of merchandise with greater depth in our customers' favorite brands across our fleet, and not just in our largest stores, help drive the results. As an omnichannel retailer, We have to be prepared to serve customers when, where, and how they want to shop, and service is always our number one priority. 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. We take this commitment to serving our customers seriously, from the initial greeting to providing assistance and a point of view at the fitting room to completing the sales. For our customers that prefer to shop online, we aim to make the experience seamless and engaging through technology. At norsham.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 of items under $100 in price. 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. Another key priority for this year is operational optimization. Given the progress our supply chain team has made on reducing operating expenses, they've 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. 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. Returns that come in faster mean that we can process, inspect, and get the items back into our inventory in a sellable condition in less time, increasing the product's overall full price exposure. Throughout the year, the supply chain team's efforts have also supported our new rack store opening successfully. More recently, they have positioned us well heading into holiday in terms of inventory flow, staffing, and shipping capacity. We also continue to advance our priority to build on the momentum at the rack during the third quarter. Our strategy of offering great brands at great prices continues to give customers a reason to choose Nordstrom Rack. In the third quarter, customers responded positively to our offering, driving net sales growth higher for the fourth consecutive quarter. 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. New rack stores continue to be a great investment for us as they deliver a solid return on capital while attracting new customers. Norshamrack.com remains a differentiator in off-price retail, enabling customers to shop when and how they want. Rack 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 in our fastest-selling items. Towards the end of the quarter, we launched store fulfillment for Rack digital orders in over 100 of our Rack stores around the country. 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. We're also excited to have launched buy online and pick up in stores at those same hundred plus rack stores for the first time ever in the third quarter. This allows norshamrack.com shoppers to purchase select items online and pick them up same day in their nearest rack location. 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. 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, convenient services, and festive events. both in stores and online. While we were excited about and well prepared for the holiday season, there was a noticeable decline in sales trends towards the end of October. As you'll hear from Kathy in a moment, we are updating our full year guidance, which takes the slowdown into consideration. 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. We're excited about the season and wish everyone a happy holiday. I'll now turn it over to Pete.