Nordstrom’s Mixed Earnings Enough To Bolster Investors 

While Nordstrom’s overall earnings report couldn’t quite be classified as a home run, the better-than-expected results were enough to bolster investors and send its stock price bouncing upward. Those outcomes were largely driven by strong inventory management and increasing strength in digital sales channels.

“We delivered strong bottom-line results, demonstrating our inventory and expense discipline. We exited the quarter in a favorable inventory position and made important strides in productivity,” said Erik Nordstrom, co-president of Nordstrom.

Earnings registered $141 million, or 90 cents a share. That is well ahead of analysts’ estimates for Q2 of 75 cents per share, but a 13 percent annual decline compared to the $162 million or 95 cents a share Nordstrom reported a year ago. Revenue was a miss, but a narrow one, with sales clocking in at $3.87 billion as opposed to the $3.93 billion forecast. Sales at full-price department stores were down 6.5 percent during the quarter, compared to a 5 percent decline logged. Nordstrom Rack had a particularly tough run – net sales were down 1.9 percent, a big change from the 7 percent rise reported at this time in 2018.

On the more favorable side of the figures, inventory management emerged as a major area of strength during the quarter, with Nordstrom reporting a 6.5 percent year-on-year decline. That marks the second quarter in a row of positive spread between inventory and sales. That has turned out to be a major differentiator in the department store segment – per Macy’s reported earnings last week, it had to resort to heavy sale action and price reductions to move an excess of inventory.

The company also reported that digital sales grew 7 percent in the quarter and now account for 30 percent of Nordstrom’s total sales. In the same quarter last year, digital represented 28 percent of its total sales.

Going forward, Nordstrom has reduced its guidance for the remainder of 2010, with the expectation that net sales will fall by about 2 percent. The retailer previously estimated that sales would be flat to 2 percent down. Its earnings guidance also took a hit, down to a range of  $3.25 to $3.50, compared to prior guidance of between $3.25 to $3.65.

The company said it did not factor impeding tariffs into the forecast. At present, they still believe they “will be relatively immaterial for the year.”

Nordstrom’s stock initially shot up 21 percent on the earnings news, though that came back down shortly. Overall, the stock was trading up 5 percent in after-hours markets. Nordstrom’s stock has fallen 57 percent in the past year, however, knocking the firm’s value down to $4 billion.