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Shares of Nordstrom have soared after the company released a report of mixed results showing a decline in sales, but far exceeding Wall Street's earnings guidance.
Its shares have increased about 13% in prolonged trading. Shares had initially risen by more than 21% after the news.
Here's how the company compared its expectations to those of Wall Street, according to Refinitiv's consensus estimates:
- Adjusted earnings per share: 90 cents versus 75 cents
- Revenue: USD 3.87 billion, compared to USD 3.93 billion estimated
"We achieved solid net results, demonstrating our discipline in inventory and expense management, closed the quarter with a favorable inventory position and made significant progress in terms of productivity," said Erik. Nordstrom, co-chairman of Nordstrom.
Traditionally, investors have responded well to the rigorous discipline of inventory management, which Nordstrom has cited as a key factor in earnings growth. The company said its inventory was down 6.5% from the previous year, marking a positive difference between inventory and sales for the second consecutive quarter. In comparison, last week, Macy said in its second-quarter earnings report that it used significant markdowns to reduce inventories, as equities rose 13 percent that day.
Sales at full-price department stores dropped 6.5% in the quarter ended Aug. 3, while sales at its non-price Nordstrom Racks declined 1.9%.
The company has reduced its forecast of net sales for the year and its earnings guidance. It expects net sales for the year to decrease by about 2%. He previously estimated that sales would be stable at 2% down. It also slightly lowered earnings per share guidance from US $ 3.25 to US $ 3.50 from previous guidance of US $ 3.25 to US $ 3.65.
On an unadjusted basis, net income decreased by almost 13% to $ 141 million, or 90 cents per share, from $ 162 million or 95 cents a share a year earlier.
Nordstrom also reported that its digital sales, which account for 30% of the business, grew by 7%. In the same quarter of last year, digital sales accounted for 28% of total sales.
The company is one of many department stores that are struggling to increase sales. Annual sales in US department stores have dropped 20% from 2017 to 2018 and are expected to fall further this year, according to the US Census Bureau. Nordstrom shares fell 57% over the past year, valuing the company at $ 4 billion.
Chinese tariffs on clothing and accessories are also weighing on Nordstrom, with retailers nationwide striving to keep costs low for the consumer.
Nordstrom's first women's department store is set to open in New York on October 24th. It is the largest investment in a single project in the history of the company. She also opened a men's store in April 2018 and previously operated only a handful of Nordstrom Racks off-price in the city.
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