Nordstrom stock jumps as earnings beat estimates and sales drop less than feared

Nordstrom (JWN) stock rose as much as 6% late Thursday after the company posted a beat to earnings and same-store sales on Thursday after the market closed.

The company reported a sales decline of 8.3% year-over-year, with CEO Eric Nordstrom attributing the drop to the timing of anniversary sales, which fell one week in the third quarter from the second quarter. The company also ended operations in Canada during the quarter.

Without these two effects, sales would have fallen by about 4 percent. The company’s Nordstrom Rack stores also outperformed the major brand stores, declining 4.1% after a 11.9% decline in the first quarter.

The company confirmed its forecast for 2023.

Nordstrom expects retail sales and credit card revenue to decline 4% to 6% year-over-year and adjusted earnings to be between $1.80 and $2.20, excluding fees related to the divestiture of its Canadian business.

In a call with investors to follow up on the results, Chief Financial Officer Katherine Smith said consumers remain cautious.

It remains to be seen how changes in inflation and higher interest rates will affect discretionary consumer spending in the second half of the year, especially during the holiday season.

rundown profits

Here are Nordstrom’s second-quarter results versus estimates, according to Bloomberg data.

  • Net sales: $3.66 billion versus an expected $3.61 billion

  • Adjusted earnings per share: $0.84 vs. $0.44 expected

  • Sector revenue:

  • Credit card: $100 million vs. $107.35 million

  • Same store sales: -8.3% vs -10.34%

  • the exams: -17.5% compared to last year

Total sales decreased by 8.3%. Nordstrom’s namesake brand net sales fell 10%, while its non-price business Nordstrom Rack saw sales decline 4.1%. Sales of activewear from brands such as HOKA, On Running (ONON), New Balance, and Nike (NKE), as well as beauty products, rose in low single digits. Children’s and men’s apparel outperformed previous quarters.

Handbag and accessories sales showed strength at Nordstrom Rack, but designer brands remain under pressure.

AURORA, CO - AUGUST 17: A general view of the atmosphere as Nordstrom Rack opens a new store on August 17, 2023 in Aurora, Colorado.  (Photo by Tom Cooper/Getty Images for Nordstrom RAK)

A general view of the sky as Nordstrom Rack opens a new store on August 17, 2023 in Aurora, Colorado. (Photo by Tom Cooper/Getty Images for Nordstrom RAK)

What else we’re watching: Declining digital sales, inventory, credit card revenue, and theft

Digital sales, which accounted for 36% of total sales in the second quarter, fell nearly 13%, driven down by Nordstrom Rack canceling in-store digital order fulfillment and closing its design service. Trunk Club in the quarter.

The Anniversary Club timing change had a negative impact on digital sales as well, according to the release.

inventory, a The main issue for Nordstrom in the second quarter of 2022Down 17.5% compared to last year. CEO Eric Nordstrom said the team is “focusing on managing inventory with greater discipline” by optimizing mix and productivity.

Credit card revenue increased 10% in the first half of the year, driven by higher credit card partner agreement and lower-than-expected credit card losses.

“We have seen delinquencies rise gradually and are now higher than pre-pandemic levels, which could lead to higher credit losses in the second half and into 2024,” Smith said.

His credit customer is usually loyal and resilient and is a “slightly higher quality consumer of credit”.

Retail theft has also been a topic on earnings calls recently, especially after thieves got away with about $300,000 worth of merchandise following a robbery. “steal flash” at Nordstrom’s California location.

Chief Executive Eric Nordstrom described the matter as “unacceptable” and something that “needs addressing”, but said it was “one of our plans”.

“We haven’t seen a sustained uptick in deflation that is beyond what we had planned for, so it is in line with the way we are going this year,” but he also said that retailers need to find “better solutions” along with lawmakers and law enforcement.

What the analysts said about the advance earnings:

“Progress is being made, but long-term remains uncertain. Our scans point to strong selling during the key anniversary sales period, and we believe they finished the sale with clean inventory. However, we still have near-term concerns about the ‘luxury consumer/luxury High incomes – reinforced by feedback from suppliers and peers – indicate continued pressure. We also still have long-term concerns about the health of the whole business. The RAC is also showing early signs of improving trade and it is clear that the off-prices are seeing strong tailwinds. At 0.4x 2024 EV/sales, the stock looks reasonable on a SoP basis, with the assumption that it will be difficult to improve on full line results over the long term. – Edward Yoruma, Piper Sandler

We think JWN is a stock loss stock and margin squeeze. We are -29% over 5 yr. CAGR per share. We think the market hasn’t priced in this weaker earnings outlook, which is why we rate JWN Sell. We see a decline in Earnings Negative deviation to the up/downside. – Jae Sol, UBS

Brooke DiPalma is a Yahoo Finance correspondent. Follow her on Twitter at @Brooke De Palma.

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