Member Exclusive   //   June 6, 2024

Research Briefing: Retailers see slow recovery in quarterly earnings

By Li Lu

In this edition of the weekly briefing, we examine how specialty retailers are performing financially as seen in data from Modern Retail+ Research.

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Nordstrom sees improvements but overall net loss for Q1

Breaking News: Nordstrom recently released its quarterly earnings report and fell short in financial performance. The retailer reported a net loss of $39 million, though a better performance compared to the $205 million loss last year in the same period. The retailer’s off-price branch saw increases in financial performance to help buffer the other areas. Nordstrom also reported strong performance in active, kids’ and women’s apparel and beauty, which in particular had the highest growth YoY. In general, the retailer does show some recovery from 2023, but a lot of performance was category-specific – a trend Modern Retail has seen across other specialty retailers.

Questions: What has financial performance been like overall for other specialty retailers? What categories are performing well?

Answers From Research:

The specialty retail cohort offered a mixed bag of financial performances. The beauty category saw major financial gains in 2023, particularly in e-commerce. Ulta benefitted from this trend and was a top performer, while Dick’s Sporting Goods and Chewy fell into the middle of the financial ranking. Barnes & Noble appeared in the bottom quartile of the index. Sephora’s parent company LVMH did not disclose full financial results at its most recent earnings, but said it achieved “remarkable growth.” Instead, Modern Retail+ Research used the average financial score as a proxy for its performance. 

A strategy that the cohort utilized well to increase revenue was its tiered membership programs. Ulta, Sephora and Dick’s Sporting Goods offer memberships based on a customer’s annual spend amount, with benefits increasing the higher the tier and the more the customer spends. These membership programs’ benefits are much more expansive than other cohorts’ programs and can help aid specialty retailers in bringing in loyal customers.

Despite a lower financial performance within the cohort, online-only pet supplier Chewy has attempted to improve its fulfillment capabilities in order to boost future financial performance. The company has been investing in automated warehouses since 2019 to save money and increase capacity. Thanks to those efforts, Chewy noted that the cost for every order declined 13% year-over-year in 2023. Chewy’s autoship program also helps the retailer predict inventory needs for warehouses and builds loyalty among Chewy’s customer base. Forty-four percent of Chewy customers have joined the retailer’s autoship program, receiving automated replenishment of their pet supplies, according to market research firm Consumer Intelligence Research Partners.

Want to learn more: The Modern Retail+ Index examines how other retailer categories are performing and the overall state of the industry.


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