Why Nordstrom Inc Stock Slumped 13% Last Month

Shares of the high-end department chain fell after it reported earnings thanks to general weakness in the department-store sector.

Jeremy Bowman
Jeremy Bowman
Jun 7, 2017 at 8:44AM
Consumer Goods

What happened

Shares of Nordstrom Inc (NYSE:JWN) were slipping last month. The high-end department store chain took a hit after reporting weak sales growth for its first quarter. According to data from S&P Global Market Intelligence, the stock fell 13% in May.

The exterior of a Nordstrom Rack store

Image source: Nordstrom.

As the chart below shows, the slide came over a two-day period -- the stock first fell on a weak report from Macy's, and then dropped again after its own quarterly results came out.

JWN Chart

JWN data by YCharts

So what

Nordstrom shares lost 18% over that two-day period as investor concerns about the department store sector continued to mount.

Nordstrom itself posted better comparable sales results than its rivals, but the key metric still fell. Overall comparable sales were down 0.8% in the period and fell 0.9% at the Nordstrom Rack off-price chain, which has been a key growth driver recently. Total revenue increased 3.2% to $3.35 billion, compared to estimates at $3.34 billion.

Adjusted earnings per share increased from $0.36 to $0.43, which easily beat expectations at $0.27 a share.

Despite the strong beat, concerns about industry headwinds and poor performance at the company's full-line stores, which saw same-store sales fall 6.4%, pressured the stock downward.

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Now what

Nordstrom's outlook for the year was also underwhelming, as the company called for flat comparable sales and an overall revenue increase of 3-4%. It also projected EPS of $2.75-$3.00, down from $3.04 a year ago and less than thrilling when compared to expectations at $2.95.  

While many of its peers are closing stores, Nordstrom has continued to open them, focusing in particular on its Nordstrom Rack chain, which now has 220 stores, up 10% from a year ago. E-commerce has also been a strong suit, and now makes up 24% of total sales. However, the full-line stores remain a weak spot.

Nordstrom shares fell 3.6% on Tuesday after Macy's said its gross margin would fall this year, which was perceived to be a warning sign for Nordstrom. Though it's outperforming its rivals, Nordstrom stock is tied to the fates of the overall department store industry for the foreseeable future. As a result, the stock will likely continue to fall until it decouples from the woes of Macy's and its ilk.