Nordstrom Falls as Pessimism Returns to the Scene for Retailers

(Bloomberg) -- Nordstrom Inc.’s high didn’t last long. The company’s shares fell in late trading on Thursday after third-quarter same-store sales, a closely-watched metric for retailers, missed analysts’ estimates, curbing optimism stemming from this year’s turnaround.

  • Comparable sales rose 2.3 percent, just shy of analysts’ expectations. At the company’s full-price stores, however, the gap was wider: There, sales rose only 0.4 percent, short of the estimate for a 2 percent gain. The shares fell as much as 13 percent in late trading.

Key Insights

  • While it’s the fourth consecutive quarter of growth in same-store sales, it seems the growth is coming from the company’s off-price Rack chain. That means customers are still flocking to discounts, rather than paying full price.
  • Digital now makes up 30 percent of sales. While that’s good news for reaching new customers, it means heavy investments in delivery and logistics, compressing margins. Gross margin of 33.3 percent was short of analysts’ 34.2 percent estimate.
  • The results show that Wall Street’s concerns about the retail industry have been reignited. Chains’ sales growth may be slowing as the economy crests, and investors have reflected these fears by selling off shares in recent days.
  • Still, Nordstrom is optimistic going forward, especially as the critical holiday season approaches. The company revised its 2018 outlook upward. Same-store sales for the year are expected to be about 2 percent, up from the 1.5 to 2 percent range Nordstrom forecast before.

Market Reaction

  • Nordstrom fell as much as 13 percent in late trading. The shares have risen almost 25 percent this year, far outpacing the 2.1 percent gain in the S&P 500 Index.

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