Nordstrom Earnings Call Insights: Gross Margin Performance and the Savvy Department

Nordstrom, Inc. (NYSE:JWN) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Gross Margin Performance

Deborah Weinswig – Citi: Can you discuss the gross margin performance in the quarter maybe just give us little more color?

Michael G. Koppel – EVP and CFO: Sure. Our gross profit benefit this quarter by an improvement in markdowns year-over-year. We saw some significant improvement in our women’s apparel business, which was reflected in that, and that was partially offset by the increased costs as it relates to our Fashion Rewards program. But overall a relatively good merchandise margin performance.

Deborah Weinswig – Citi: As your guidance – in the future you talked about not relying on EBIT margin expansion to drive future growth. And obviously there is a lot of moving pieces and Internet growth and growth in the outlet, no Rack business. As we look at all the moving pieces and not much borrowing growth, how should we think about one offsetting the other?

Michael G. Koppel – EVP and CFO: Well, I think the first way to look at it is the chart that we shared that show the change in the growth in the businesses and how they are contributing to the overall sales of the Company. I think in terms of the EBIT margin expansion the most important thing to remember is, over the next several years we’re going to be investing to ensure we have a long-term sustainable growth platform. The investments such as the accelerated technology investments, the upfront investments required to move into Canada, the acceleration of the Rack, all those things have a medium-term impact on our margin performance, but are there to assure that we’ve got platform to deliver much larger dollar earnings growth over the long-term.