Nordstrom Guidance Cut Cast More Doubt on Retailers

Andrew Klips  |

Nordstrom, Inc. (JWN) on Thursday reported second-quarter results that grew compared to last year, but total sales fell short of analyst expectations as the Seattle-based company cut its outlook for the full year, sending shares lower after hours to extend losses on the day.

For the quarter ended August 3, the luxury retailer said that revenue increased 6.4 percent to $3.2 billion from $3.01 million in the year prior quarter.  Net earnings rose to $184 million, or 93 cents per share, versus $156 million, or 75 cents per share, in the second quarter last year.

The earnings per share topped expectations of 88 cents, but revenue was light of predictions of $3.29 billion.  In May, Nordstrom projected earnings per share to come in around 86 cents for the quarter.

Sales during the second quarter reaped the full reward of Nordstrom’s annual anniversary sale, generally the biggest sale of the year for the company.  In 2012, the anniversary sale was split between the second and third quarters. That means this year’s third quarter will face a tough comparison.

Nordstrom same-store sales, which include Internet sales and full-line sales, during the quarter rose 4.2 percent.  Full-line sales decreased by 0.7 percent, weighing on direct sales’ improvement of 37 percent.  Direct sales last year grew 40 percent compared to 2011, demonstrating shopper’s propensity to stay at home to order.  Total same-store sales were up 4.4 percent.  While a nice expansion, that still missed expectations of a 6.8-percent increase that analysts forecast.

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The company’s Rack segment, which sells discounted merchandise, saw sales grow 12 percent to $69 million as it added 17 new stores.  Year-over-year, same-store sales in the Rack division increased 2.4 percent, decelerating from 7.7-percent growth from 2011 to 2012.  Nordstrom plans to open 14 more Rack locations during 2013.

All tallied, the company operates 248 stores, comprised of 117 Nordstrom stores and 131 Rack and other brand locations.

The company said that sales trends showed “moderate improvement” compared to the slow start of the year, but were still less than expected.

Seeing trends stagnating, Nordstrom said that it now sees full-year sales increasing 3 percent to 4 percent, down from its prior guidance of 4 percent to 6 percent growth.  Increases in same-store sales were cut from 3 – 5 percent down to 2 – 3 percent.  Earnings forecasts were also shaved, dropped from a range of $3.65 - $3.80 per share to $3.60 - $3.70 per share.

Nordstrom is often viewed as a bellwether of luxury spending with growth in its business perceived as strength in the nation’s economy.  Yesterday, rival Macy’s, Inc. (M) cast a shadow on consumer spending by slashing it full-year earnings forecast and reporting earnings from the latest quarter that were short of expectations.  Macy’s blamed shopper’s hesitance to spend at department stores for the drop in sales, saying people are choosing rather to spend their cash on cars, houses and home improvements.

Shares of JWN have lagged the major indexes in 2013, rising about 12 percent so far this year through Thursday’s close at $59.33.  Those gains were trimmed more in extended trading following the earnings news, doffing-off another 2.5 percent to $57.89.  Shares of M have lost 4.5 percent in the past two days with their soft outlook.


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