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Nordstrom stock dips on weak Q3 earnings

Nordstrom (JWN) reported a 41% dip in earnings for the third quarter due to the reversal of the previous quarter’s impact of the revenue recognition standard as it relates to the timing of the Anniversary Sale. The results missed analysts’ expectations. Following this, the stock plunged over 11% in the after-market session.

Net income plunged 41% to $67 million and earnings dipped 42% to $0.39 per share. Excluding an after-tax impact of $49 million for the estimated credit-related charge, net earnings were relatively flat. This reflected the timing of the Anniversary Sale, partially offset by a lower effective tax rate.

Net sales for the quarter increased 3% to $3.65 billion. This included an unfavorable timing shift of about 100 basis points, related to the timing of the Anniversary Sale. Combined second and third quarter net sales, which removes these timing impacts, increased 5.1% compared with the last year.

Nordstrom Q3 2018 Earnings Infographics

Comp-store sales, one of the key metrics to watch, rose 2.3%. The strong growth in same-store sales was due to strong topline growth from full-price and off-price store sales. Full-price stores saw sales growth of 0.4% while the off-price store sales surged 5.8% compared to last year.

Looking ahead into the full year 2018, Nordstrom lifted its sales outlook to the range of $15.5 billion to $15.6 billion from the prior range of $15.4 billion to $15.5 billion. Earnings target is narrowed to a range of $3.55 to $3.65 per share from the prior estimate range of $3.50 to $3.65 per share. Comp-sales growth is revised upwards now to about 2% from the prior range of 1.5% to 2%.

For the third quarter, selling, general and administrative expenses, as a percentage of net sales, rose 188 basis points year-over-year to 33.1%. Excluding the estimated credit-related charge of $72 million, SG&A, as a percentage of net sales, was relatively flat. This reflected the moderated growth of digital capabilities due to ongoing efforts to drive productivity improvements.

Nordstrom surges above 10% on strong Q2 results

Excluding the estimated charge, the company is on track to achieve its plan for mid-single-digit growth in SG&A expenses for the year. Excluding the non-recurring estimated credit-related charge of $72 million, or $0.28 per share, Nordstrom remains on track to achieve an inflection point for profitable growth in fiscal 2018.

For the year 2018, the company narrowed its EBIT outlook excluding the impact of estimated credit-related charge to the range of $935 million to $960 million from the previous range of $925 million to $960 million. Excluding the impact of any future share repurchases but including credit-related charge impact, earnings are anticipated to be in the range of $3.27 to $3.37 per share.

To date in fiscal 2018, the company opened sixteen stores, closed two stores and relocated one store. As of November 3, 2018, Nordstrom had a total of 380 stores, up from 366 stores as of October 28, 2017.

Shares of Nordstrom ended Thursday’s regular session down 3.45% at $58.99 on the NYSE. The stock has risen over 24% in the year so far and over 50% in the past year.

 

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