Business

Listen to this story. Enjoy more audio and podcasts on More

American Eagle unveiled a new strategy to boost profitable growth over the next three years.
It wrote off $94 million in impairment charges related to its internal logistics business Quiet Platform.
The apparel retailer, which runs its namesake banner, Aerie and Offline, beat Wall Street’s expectations thanks to strong demand and lower markdowns and input costs. 

A shopper walks by an American Eagle store on November 21, 2023 in Glendale, California. 
Justin Sullivan | Getty Images

American Eagle on Thursday announced a new strategy to boost profitable growth over the next three years, as the retailer said it wrote off $94 million in impairment charges related to its internal logistics business Quiet Platform.
The company also reported holiday earnings that beat Wall Street’s expectations thanks to strong demand and lower markdowns and input costs. 

Here’s how American Eagle did in its fourth fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

Earnings per share: 61 cents adjusted vs. 50 cents expected
Revenue: $1.68 billion vs. $1.67 billion expected

The company’s reported net income for the three-month period that ended Feb. 3 was $6.32 million, or 3 cents per share, compared with $54.6 million, or 28 cents per share, a year earlier. Excluding one-time items, American Eagle posted adjusted earnings of 61 cents per share. 
Sales rose to $1.68 billion, up about 12% from $1.5 billion a year earlier. 
In the current quarter, American Eagle expects sales to be up by a mid-single digit percentage, which is in line with estimates of up 5%, according to LSEG. For the full year, it expects sales to be up 2% to 4%, the higher end of which would beat the 2.9% analysts had expected, according to LSEG. 
During the Covid pandemic, American Eagle spent hundreds of millions of dollars acquiring a number of shipping and distribution companies that eventually became Quiet Platforms, the retailer’s internal logistics branch. It was designed to streamline American Eagle’s own shipping needs, but the company also sought to “Uber-ize” the global supply chain by serving as a logistics platform for other companies. 

Last spring, American Eagle acknowledged that Quiet Platforms wasn’t performing as it had expected. The segment’s president and chief operating officer had left the company as the retailer worked to restructure the business, RetailDive reported.
During the fourth quarter, American Eagle took $98.3 million in impairment and restructuring charges related to Quiet Platforms, the bulk of which were impairments to its goodwill, intangible assets and technology that are no longer a part of the platform’s long-term strategy. Employee severance costs made up $4.3 million in charges.
While the investments may no longer be worth what they once were at the time the company made them, finance chief Mike Mathias told CNBC the platform has benefited the overall business. 
“We’re seeing benefits from across our brand’s p&l segments,” said Mathias. “A nice portion of our gross margin gains have come from delivery and supply chain cost leverage that this [platform] we’ve now put in place has enabled.”
Looking ahead to the next three years, American Eagle unveiled its “powering profitable growth plan” that focuses on three key pillars – Amplify, Execute and Optimize. In an apparent nod to the business, the pillars also spell out AEO, American Eagle’s initials and stock ticker. 
The strategy seeks to deliver mid-to-high teens annual operating income expansion off of 3% to 5% annual revenue growth over the next three years. American Eagle also seeks to get its operating margin to approximately 10%. 
The retailer has been working over the last year to boost profits as its margins pale in comparison to some competitors. During the fourth quarter, its gross margin stood at 37.3%. It was higher than the 36.6% that StreetAccount had expected, but far below the gross margin of its longtime rival Abercrombie & Fitch, which on Wednesday reported a fiscal fourth quarter margin of about 63%. 
To increase profits, American Eagle plans to amplify its brands by growing its namesake banner, boost Aerie’s expansion and develop the activewear assortment at its Offline banner. It will focus on financial discipline and optimizing its operations to fuel growth and long-term profit.
“Starting with American Eagle… we’ve been up to really rebuilding that brand for the past three years, rationalizing the fleet, rationalizing SKU count, really targeting what we were missing on,” Jennifer Foyle, American Eagle’s president and executive creative director, said in an interview with CNBC. “We were definitely over assorted and so there’s been a lot of work and then building the brand DNA, which you’re going to see a nice unveil for back to school.” 
She said the company has a new store design that’s doing better than average, and it has plans to renovate its store fleet gradually to build on that success. It’s also leaning into new categories, such as its Offline banner, which it launched in 2020 and has outpaced Aerie’s growth in its early years. 
“In the same mall, if we open up an Offline store, that store is either equal to the Aerie volume, or in some cases, outpacing the Aerie volume,” said Foyle. “In a very highly penetrated business of activewear I think we’re winning by entertaining and doing it slightly different than our competition. We’re colorful, we’re animated, the stores are fun and exciting. So I think we really have a really stronghold on what we can deliver in that business and we like the results.” More

United Airlines is planning to debut flights between Houston, Texas, and Medellin, Colombia, and from Newark, New Jersey, to Marrakesh, Morocco.
The carrier is adding more flights to Shanghai; Hong Kong; Seoul, South Korea; and Porto, Portugal.
Major U.S. airlines have posted higher revenue growth from international flights than from domestic trips.

A United Airlines Boeing 787-8 Dreamliner aircraft is seen taking off from Amsterdam Schiphol Airport.
Nicolas Economou | Nurphoto | Getty Images

United Airlines is planning to launch flights to Marrakesh, Morocco, and Medellin, Colombia, and ramp up its service to Asia, in the carrier’s latest bet that consumers will continue to shell out for trips abroad.
The flights from United’s Newark, New Jersey, hub to Marrakesh are scheduled to begin Oct. 24 using a Boeing 767-300ER. The carrier’s Houston-to-Medellin flight is slated to start Oct. 27, on Boeing 737s, it said Thursday. The airline is also starting year-round service to Cebu, Philippines, from Tokyo’s Narita Airport.

“Our play here with these three cities is premium leisure,” Patrick Quayle, United’s senior vice president of network planning and alliances, told CNBC. “We see strong business [class] demand, and there’s a strong correlation with people buying in biz class and Premium Select with the length of haul.”
U.S. airlines have increased their international service coming out of the Covid-19 pandemic, and revenue growth from trips abroad has outpaced domestic sales. United’s international revenue grew 18% in the last four months of 2023, while sales from domestic tickets grew less than 7%.
United also said it will offer four weekly flights between Shanghai and Los Angeles starting Aug. 29.
It’s also adding a second daily flight between Los Angeles and Hong Kong, and starting Oct. 25, will have second daily flights between San Francisco and Seoul, South Korea, and between Newark and Porto, Portugal.Don’t miss these stories from CNBC PRO: More

President Joe Biden said the federal Medicare program should negotiate prices for at least 50 prescription drugs each year, up from the current target of 20 medicines. 
That proposal is one of several new health-care policy plans Biden will outline during his State of the Union address Thursday.
But the fate of his new proposals will be in the hands of a divided Congress, making it highly uncertain whether they will pass into law. 

President Joe Biden speaks during an event at the National Institutes of Health in Bethesda, Maryland, Dec. 14, 2023.
Chris Kleponis | Bloomberg | Getty Images

President Joe Biden on Wednesday said the federal Medicare program should negotiate prices for at least 50 prescription drugs each year, up from the current target of 20 medicines. 
That’s one of several new health-care policy proposals that Biden will outline during his State of the Union address Thursday, according to a fact sheet released by the White House on Wednesday. Many of those efforts aim to expand parts of the Inflation Reduction Act that are geared toward making medicines more affordable for seniors and could take a bite out of the pharmaceutical industry’s profits.

“Medicare should not be limited to negotiating just 20 drugs per year. Instead, the President is proposing that Medicare be able to negotiate prices for the major drugs that seniors rely on, like those used for treating heart disease, cancer, and diabetes,” the fact sheet read.
Biden has made lowering U.S. drug prices a key pillar of his health-care agenda and reelection platform for 2024. But the fate of his new proposals will be in the hands of a divided Congress, making it highly uncertain whether they will pass into law. 
The president’s call to raise the number of drugs eligible for negotiations with Medicare will likely face the fiercest blowback from the pharmaceutical industry.
The Biden administration is already in a bitter legal fight with several drugmakers over the talks. The administration clinched early wins in two separate cases over the matter this year, but the industry is aiming to escalate the issue to the Supreme Court. 
The Centers for Medicare and Medicaid Services kicked off the negotiation process last fall when it unveiled the first 10 drugs that are subject to price talks with Medicare. The negotiations for those medications end this fall, with new prices going into effect in 2026. 

After the initial round of talks, Medicare can negotiate prices for another 15 drugs that will go into effect in 2027 and an additional 15 beyond that to take effect in 2028. Under the current structure, the number rises to 20 negotiated medications a year starting in 2029.
Last year, Biden indicated that he wanted more drugs to be subject to negotiations. Wednesday is the first time his administration has specified a higher target number.  
The change will “not only save taxpayers billions of dollars, but more importantly, it will save lives and give seniors critical breathing room that they need,” said Neera Tanden, who serves as the president’s domestic policy advisor, during a call with reporters Wednesday.
The president’s budget cuts federal spending by $200 billion, the White House fact sheet noted. That could increase the number of drugs that Medicare could select for negotiation and bring more medicines to the negotiation process sooner.
The White House did not disclose whether the number of drugs would gradually rise to 50 after several years under the proposal, or if that new number would apply starting in 2029. A senior administration official told reporters Wednesday that the president looks forward to working with Congress on the details of the proposal.
“We have built a system that we are confident is working and will deliver lower prices for the American people, and we believe we can scale that up,” the administration official said.
Among the other policy proposals are measures to cap Medicare copayments at $2 for common generic drugs and to extend the $2,000 cap on out-of-pocket drug costs beyond Medicare to all private plans.
Biden also wants to expand another provision of the Inflation Reduction Act that requires drugmakers to pay rebates to Medicare when their drug prices rise faster than inflation. The president wants that policy to apply to commercial drugs, not just medicines sold to Medicare. More

A mega-yacht seized by U.S. authorities from a Russian oligarch is costing the government nearly $1 million a month to maintain, according to new court filings.
The Justice Department is seeking permission to sell Amadea, which it seized in 2022, alleging that it was owned by sanctioned Russian billionaire Suleiman Kerimov.
Attorneys for Eduard Khudainatov, an ex-Rosneft CEO who has not been sanctioned, say he owns the yacht, and have sought to take back possession of the vessel.

A mega-yacht seized by U.S. authorities from a Russian oligarch is costing the government nearly $1 million a month to maintain, according to new court filings.
The U.S. Department of Justice is seeking permission to sell a 348-foot yacht called Amadea, which it seized in 2022, alleging that it was owned by sanctioned Russian billionaire Suleiman Kerimov. The government said it wants to sell the $230 million yacht due to the “excessive costs” of maintenance and crew, which it said could total $922,000 a month.

“It is excessive for taxpayers to pay nearly a million dollars per month to maintain the Amadea when these expenses could be reduced to zero through [a] sale,” according to a court filing by U.S. prosecutors on Friday.
The monthly charges for Amadea, which is now docked in San Diego, California, include $600,000 per month in running costs: $360,000 for the crew; $75,000 for fuel; and $165,000 for maintenance, waste removal, food and other expenses. They also include $144,000 in monthly pro-rata insurance costs and special charges including dry-docking fees, at $178,000, bringing the total to $922,000, according to the filings.

Sign up to receive future editions of CNBC’s Inside Wealth newsletter with Robert Frank.

The battle over Amadea and the costs to the government highlight the financial and legal challenges of seizing and selling assets owned by Russian oligarchs after the country’s invasion of Ukraine. European Commission President Ursula von der Leyen said last week that the European Union should use profits from more than $200 billion of frozen Russian assets to fund Ukraine’s war effort.
Her comments echoed government calls in the spring of 2022 to freeze the yachts, private jets and mansions of Russian billionaires in hopes of putting pressure on Russian President Vladimir Putin and raising money for the war effort.
Yet, nearly two years later, the legal process for proving ownership of the Russian assets and selling them has proven to be far more time-consuming and costly. In London, Russian billionaire Eugene Shvidler has waged a court battle over his private jets that were impounded, and Sergei Naumenko has been appealing the detention of his superyacht Phi.

Mega-yacht Amadea of sanctioned Russian oligarch Suleiman Kerimov, seized by the Fiji government at the request of the U.S., arrives at the Honolulu Harbor, Hawaii, on June 16, 2022.
Eugene Tanner | AFP | Getty Images

The battle over Amadea began in April 2022, when it was seized in Fiji at the request of the U.S. government, according to the court filings.
Though the U.S. alleges that the yacht is owned by Kerimov, who made his fortune in mining, attorneys for Eduard Khudainatov, an ex-Rosneft CEO who has not been sanctioned, say he owns the yacht, and have sought to take back possession of the vessel.
In court filings, Khudainatov’s attorneys have objected to the U.S. government’s efforts to sell the yacht, saying a rushed sale could lead to a distressed sale price and that the maintenance costs are minor relative to the potential sale value.
Khudainatov’s attorneys refuse to pay the ongoing maintenance costs as long as the government pursues a sale and forfeiture. However, they say their client will reimburse the U.S. government for the more than $20 million already spent to maintain the yacht if it’s returned to its proper owner.
In court papers, the government says Kerimov disguised his ownership of Amadea through a series of shell companies and other owners. They say emails between crew members show Kerimov “was the beneficial owner of the yacht, irrespective of the titleholder of the vessel.”
The emails show that Kerimov and his family ordered several interior improvements of the yacht, including a new pizza oven and spa, and that between 2021 and 2022, when the boat was seized, “there were no guest trips on the Amadea that did not include either Kerimov or his family members,” according to the court filings.
The government also says Kerimov has been trying to sell Amadea for years, so a sale would be in keeping with his intent.
“This is not a situation in which a court would be ordering sale of a precious heirloom that a claimant desperately wishes to keep for sentimental reasons,” the government said in filings.
Even if Amadea were sold quickly, the proceeds wouldn’t automatically go to the government. Under law, the money would be held while Khudainatov and the government continue their battle in court over the ownership and forfeiture.Don’t miss these stories from CNBC PRO: More

Abercrombie & Fitch beat holiday-quarter estimates on the top and bottom lines.
The retailer issued strong guidance for the year ahead, indicating it’s confident its growth story will continue.
In early January, Abercrombie raised its fourth quarter and full-year outlook after holiday sales came in better than expected.

An Abercrombie & Fitch store in New York, US, on Monday, Nov. 20, 2023. Abercrombie & Fitch Co. is scheduled to release earnings figures on November 21. 
Stephanie Keith | Bloomberg | Getty Images

Abercrombie & Fitch said Wednesday that its holiday-quarter sales jumped 21% and its profits grew thanks to higher prices and lower raw material costs.
The apparel retailer expects its growth story will continue as it issued better-than-expected sales guidance.

Here’s how Abercrombie did in its fourth fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

Earnings per share: $2.97 vs. $2.83 expected
Revenue: $1.45 billion vs. $1.43 billion expected

The company’s reported net income for the three-month period that ended Jan. 28 was $158.4 million, or $2.97 per share, compared with $38.33 million, or 75 cents per share, a year earlier. 
Sales rose to $1.45 billion, up about 21% from $1.2 billion a year earlier.
For the current quarter, Abercrombie expects sales to rise by a low double digit percentage, compared to estimates of up 7.2%, according to LSEG. For the full year, its anticipates sales will grow between 4% and 6%, compared to estimates of 4%, according to LSEG.
During the quarter, comparable sales grew 16% and gross margin came in at 62.9%, 7.2 percentage points higher than the year ago period. Higher average selling prices plus lower freight and raw material costs boosted profits.  Analysts had expected Abercrombie’s gross margin to be 60.1%, according to StreetAccount.

“Our strong fourth quarter was fueled by sales growth across regions and brands. Abercrombie brands grew net sales 35%, continuing an impressive multi-quarter growth trend, while Hollister brands grew 9%, delivering a third consecutive quarter of sales growth,” CEO Fran Horowitz said in a statement.
“By staying close to our customers, tightly controlling inventories and continuing to operate with financial discipline, our team delivered year-over-year fourth quarter operating margin expansion of 800 basis points, reaching 15.3%,” she continued.
In the year ahead, Horowitz said the company is focused on expanding its global customer base and getting closer to reaching its long-term goal of $5 billion in global annual sales. During fiscal 2023, Abercrombie came close to that target, posting full-year revenue of $4.28 billion.
Abercrombie, once known for its heavily-perfumed mall stores and shirtless models, has transformed into an inclusive lifestyle brand that traded screaming logos for quieter, refined styles that work for a variety of occasions and age groups. 
With Horowitz at the helm, Abercrombie has redefined itself to the public and has harnessed the power of social media marketing and an army of influencers to win over a new generation of customers and woo back millennials that grew up with the brand. 
Wall Street has been pleased with the transformation, which took off in earnest last year. At the start of 2023, its stock was trading around $23 a share, and by the end of the year, it had surged nearly 283% to $88. 
So far this year, its stock is up about 59% as of Tuesday’s close. 
As Abercrombie gears up to face tougher prior-year comparisons in the quarters ahead, it’s remaining optimistic. 
In early January, Abercrombie raised its fourth quarter and full-year outlook after holiday sales came in better than expected. It said it was expecting net sales to rise in the mid-teens and its operating margin to come in around 15% for the fiscal fourth quarter, compared to a previous outlook of low double digit sales growth and a margin range of 12% to 14%. 
At the time, Horowitz said Abercrombie & Fitch’s women’s business was expected to see its highest sales ever during the fourth quarter. She added that revenue in its men’s business, a growth driver for the company, had also climbed. Horowitz added the company’s Hollister brand was on track for higher profits as it focused on better merchandising and inventory management. 
As investors look past the holiday season and into the spring and summer, they’ll be watching to see if Abercrombie can continue growing as consumers become increasingly cautious, especially when it comes to discretionary purchases like clothes. 
Read the full earnings release here.  More

Foot Locker reported a holiday-quarter loss on Wednesday.
The company also gave weak guidance for the current year.
The sneaker retailer has been in the midst of a turnaround under former Ulta boss Mary Dillon.

The Foot Locker logo is displayed in a store on May 19, 2023 in San Francisco, California. 
Justin Sullivan | Getty Images

Shares of Foot Locker fell in premarket trading Wednesday after the sneaker retailer reported a holiday-quarter loss, issued weak guidance for the current year and said it’s behind on meeting its financial goals.
Given how poorly its past fiscal year went, the company is now expecting the profitability goal it laid out during its March 2023 investor day to be delayed by two years, Foot Locker’s finance chief Mike Baughn said. It now expects to reach an EBIT margin of 8.5% to 9% by 2028, said Baughn.

Here’s how the company did in its fourth fiscal quarter, compared with estimates from analysts surveyed by LSEG, formerly known as Refinitiv:

Earnings per share: 38 cents adjusted vs. 32 cents expected
Revenue: $2.38 billion vs. $2.28 billion expected

The company swung to a loss in the three-month period that ended Feb. 3. Foot Locker lost $389 million, or $4.13 per share, compared with an income of $19 million, or 20 cents per share, a year earlier. Excluding one time items, Foot Locker reported earnings of 38 cents per share.
Sales rose slightly to $2.38 billion, up about 2% from $2.34 billion a year earlier.
In the current fiscal year, Foot Locker is expecting profits to be worse than analysts had expected. It anticipates adjusted earnings per share will be between $1.50 and $1.70, compared with estimates of $1.40 to $2.30, according to LSEG.
For fiscal 2024, Foot Locker is expecting sales to be between down 1% and up 1%, compared to estimates of down half a percent, according to LSEG.

CEO Mary Dillon said in a statement that Foot Locker managed to drive full-price sales “in addition to compelling promotions” during its holiday quarter. But the retailer’s gross margin fell by 3.5 percentage points “primarily as a result of higher markdowns.” 
We “proactively reinvested in markdowns to end the year with leaner inventory levels compared to our expectations,” said Dillon. “As we continue evolving into a modern, omnichannel retailer for ‘all things sneakers,’ we are making important progress strengthening our brand partnerships, increasing customer engagement, transforming our real estate footprint, and driving growth in digital.” 
Overall comparable sales decreased 0.7%, which is better than the 7.9% drop that analysts had expected, according to StreetAccount. Comparable sales at Foot Locker and Kids Foot Locker in North America increased 5.2%
It’s been a little over a year since CEO Mary Dillon took the helm of Foot Locker. During her tenure, sales have consistently fallen as the retailer grappled with a changing mix of sneaker brands and a target consumer that has felt the brunt of inflation more acutely than those in higher income brackets. 
Foot Locker has also been repositioning its Champs Sports brand and has grappled with high inventory levels that, unlike its peers, it has struggled to curb. During the quarter, Foot Locker relied on markdowns to reduce inventory levels by 8.2% compared to the prior year.
In her past life as Ulta Beauty’s chief executive, Dillon skillfully won over buzzy beauty brands and turned the company into a powerhouse cosmetics retailer. When she took over as Foot Locker’s top boss in Sept. 2022, she was seen as the savior the legacy retailer sorely needed. 
While Dillon inherited a slew of problems that existed long before she took over, and is still highly regarded across the retail industry, her turnaround of Foot Locker has come more slowly than some analysts had expected. 
During its fiscal third quarter, Foot Locker eked out surprise beats on the top and bottom lines. Dillon told investors the company was making progress with its turnaround initiatives. The company inked a new marketing deal with the NBA, made plans to enter India and said the holiday quarter was off to a strong start.
Dillon has also worked to revamp Foot Locker’s store footprint. Many of the retailer’s stores are in underperforming malls, and Dillon wants the company to focus on more experiential stores that are better suited for the communities they operate in. During the fourth quarter, Foot Locker opened 29 new stores, remodeled or relocated 66 locations, and closed 113 stores. 
Last March, Dillon touted a renewed and revitalized relationship with Nike, which has long been the largest driver of Foot Locker’s sales. She has also sought to reduce the company’s reliance on the sneaker giant as it has focused on driving direct sales and squeezing out wholesalers.
The relationship between the two brands still appears to be in a state of flux. On earnings calls, Nike routinely points to Dick’s Sporting Goods and JD Finish Line as its treasured wholesale partners.
But in mid-February, Foot Locker announced a new partnership with its longtime supplier. The partnership, dubbed The Clinic, brings together Foot Locker, Nike and Jordan Brand, and will feature “interactive activations, high reach media, real life basketball clinics, social media content, community events and more.” 
The partnership officially launched during the 2024 NBA All-Star Game in Indianapolis, In. 
Read the full earnings release here.  More

Nordstrom beat sales expectations for the holiday quarter.
Yet, the department store said its revenue may decline in the coming year, which has one less week of sales.
The Seattle-based company said it plans to open new Nordstrom Rack stores and drive higher online and in-store sales in the coming year.

Shoppers exit the Nordstrom at the Westfield Topanga mall in Los Angeles on Aug. 14, 2023.
Christina House | Los Angeles Times | Getty Images

Nordstrom’s holiday-quarter sales topped Wall Street’s expectations on Tuesday, but the retailer gave a muted outlook for the year ahead, and shares fell about 10% in extended trading.
The Seattle-based company said it plans to open new Nordstrom Rack stores and drive higher online and in-store sales in the coming year. Yet, it said full-year revenue, including retail sales and credit cards, will range from a 2% decline to a 1% gain compared with the previous year. That forecast includes a more than 1% hit from having one less week in the fiscal year.

Nordstrom said it expects earnings per share between $1.65 and $2.05 for the full year. That would be higher than its most recent fiscal year, which saw earnings per share of $1.51, the retailer said Tuesday.
Here’s what the department store operator reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

Earnings per share: 96 cents adjusted vs. 88 cents expected
Revenue: $4.42 billion vs. $4.39 billion expected

Similar to other retailers, Nordstrom has felt the squeeze from consumers becoming choosier and more price-conscious while dealing with inflation and higher interest rates. It has also struggled with company-specific problems, such as lagging sales at its off-price retailer, Nordstrom Rack, and too much of the wrong inventory, which led to higher levels of markdowns.
In the fiscal quarter that ended Feb. 3, Nordstrom’s quarterly revenue rose about 2% from $4.32 billion in the year-ago period. It attributed approximately $190 million of those sales to having an extra week in the fiscal year.
Nordstrom’s net income rose to $134 million, or 82 cents per share, from $119 million, or 74 cents per share, a year earlier. Excluding a charge associated with relocating the company’s fulfillment center, as well as other adjustments, earnings per share were 96 cents.

Net sales for the company’s namesake banner declined 3% in the fourth quarter compared with the year-ago period. That includes a 4.1% lift from the extra week of the fiscal year.
The company’s wind down of its Canadian business took a bite out of sales, causing net sales to drop more than 3%. The company announced a year ago that it would shut down its stores and online operations in Canada.

Rack results

Nordstrom Rack, the company’s off-price brand, was the strongest performer in the holiday quarter. Its net sales rose 14.6%, including a 5.8% boost from the extra week in the year. 
In the fourth quarter, more shoppers visited Nordstrom Rack’s website and made purchases when they did, CEO Erik Nordstrom said on the company’s earnings call.
The off-price chain grew, even when taking out the boost from opening new stores, with the banner’s comparable sales up high single digits, he said.
Nordstrom opened 19 new Nordstrom Rack stores during the fiscal year, for a total of 258 stores. Including its 93 flagship Nordstrom locations, the company ended the year with 359 total stores, just one more than it had at the end of the year-ago period.
The retailer plans to open 22 new Nordstrom Rack stores in 2024.
On the earnings call, Erik Nordstrom said the chain is “a growth engine for our company” and Nordstrom’s “largest source of new customer acquisition.”
He said roughly a quarter of retained Rack customers migrate to the Nordstrom banner within four years.
The company did not announce plans to open new stores under its flagship banner, but Erik Nordstrom said those stores are a major part of the company’s business.
“Some of our fastest-growing stores this past year were our big urban flagship stores,” he said. “In particular, New York has shown real strong growth.”

Shopping trends

Women’s apparel, beauty and the active category had the strongest growth year over year in the fourth quarter. Some popular purchases included athletic shoes from On Running and Hoka, and apparel from Vuori, Erik Nordstrom said. Shoppers also bought fragrances and apparel from fashion-forward brands such as Vince and Cinq a Sept during the holiday quarter, he said.
Online sales dropped 1.7% in the fourth quarter compared with the year-ago period. E-commerce represented 38% of total sales during the quarter, down from 40% in the same period a year earlier, and 36% for the fiscal year, down from 38% in fiscal 2022. 
Store traffic “continues to be on the soft side,” though traffic at Nordstrom stores improved sequentially throughout the year, Erik Nordstrom said on the earnings call. He said website traffic remains soft, too. Yet, he said average order value is going up both online and in stores.
Inventory at the end of the quarter was down 2.7% compared with the year-ago period. The company entered the holiday quarter with less inventory, too, which led to fewer markdowns and fresher merchandise, Erik Nordstrom said.
In the coming year, he said the retailer will focus on driving sales growth at its namesake banner, operating more efficiently and building on momentum at Nordstrom Rack.
In April, it will launch an online marketplace on Nordstrom’s website to expand its merchandise assortment with inventory that’s owned and sold by third-party vendors. Marketplaces tend to be more profitable for retailers, since the company does not take on the risk of buying inventory that customers may not like and get stuck with marking it down.
Nordstrom will also personalize the online experience for shoppers to direct them to items that they may like, he said. Online and in stores, beauty will play a prominent role in driving sales growth, he said.
As of Tuesday’s close, Nordstrom shares are up about 6% over the past year. That has underperformed the approximately 25% gains of the S&P 500. Nordstrom’s stock closed Tuesday at $20.90, bringing the company’s market value to about $3.4 billion.Don’t miss these stories from CNBC PRO: More