Nordstrom stock jumps as earnings beat estimates, sales fall less than feared

Nordstrom stock jumps as earnings beat estimates, sales fall less than feared | Enterprise Wired

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After the firm reported a beat on earnings and same-store sales on Thursday after the market closed, Nordstrom’s (JWN) stock increased by as much as 6% late on Thursday.

CEO Erik Nordstrom attributed the company’s 8.3% revenue reduction from the same time period last year to the timing of its Anniversary Sale, which was moved one week into the third quarter from the second. During the quarter, the business also shut down its operations in Canada.

Instead of increasing by roughly 4%, sales would have decreased by these two effects. The company’s Nordstrom Rack stores did better than its namesake brand stores, with a 4.1% decline following an 11.9% decline in the first quarter.

Gap and Nordstrom report Q2 earnings: Analyst weighs in challenges facing the retailers

The business reaffirmed its outlook until 2023

Retail sales and credit card revenues are expected to decline between 4% and 6% from last year, while adjusted earnings, excluding costs associated with the winding down of its Canadian business, are projected to range between $1.80 and $2.20.

Consumers are still being cautious, according to CFO Catherine Smith, who spoke with investors on a teleconference after the report.

It is yet unclear how rising interest rates and fluctuations in inflation will impact consumer discretionary spending in the second half of the year, particularly around the holidays.

Sales as a whole fell 8.3%. Net sales for the company’s name-brand Nordstrom fell by 10%, while those for its off-price division Nordstrom Rack fell by 4.1%. Sales of beauty goods and activewear from companies including HOKA, On Running (ONON), New Balance, and Nike (NKE) increased by low single digits. Men’s and children’s clothing did better than in previous quarters.

At Nordstrom Rack, accessory and handbag sales were strong, but designer brand sales are still struggling.

Inventory, is a major problem for Nordstrom

Other things we’re watching: a reduction in digital sales, inventories, revenue from credit cards, and theft. In Q2, digital sales, which accounted for 36% of total sales, fell by over 13% as a result of Nordstrom Rack discontinuing the in-store fulfillment of digital orders and the Trunk Club styling service.

According to the statement, the Anniversary Sale’s new date had a detrimental effect on digital sales as well.

Inventory, a major problem for Nordstrom in Q2 2022, fell 17.5% from the previous year. The group is “focused on managing inventory with greater discipline” through enhancing mix and productivity, according to CEO Erik Nordstrom.

Due to its credit card partner agreement and lower-than-anticipated credit card losses, credit card revenues increased by 10% in the first half of the year.

However, Smith warned that the gradual rise in delinquencies—which are now greater than before the pandemic—could lead to bigger credit losses in the second half and into 2024.

Its credit customers tend to be dependable, devoted, and “little higher-quality credit consumers.”

Recently, earnings calls have also discussed retail theft, particularly after burglars fled with around $300,000 worth of goods following a “flash rob” at a Nordstrom store in California.

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