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Why Nordstrom Inc. Stock Tumbled Today

By Jeremy Bowman – May 18, 2018 at 12:21PM

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Shares of the department store operator slipped today as a key sales figure disappointed in its earnings report.

What happened

Shares of Nordstrom Inc. (JWN 3.48%) were heading lower today after the department store chain turned in a disappointing first-quarter earnings report with comparable sales coming in lower than expected. As a result, the stock was down 9.2% as of 11:17 a.m. EDT. 

A mock-up of the upcoming Nordstrom store in Manhattan

Image source: Nordstrom.

So what

Comparable sales for the period, which include e-commerce, rose just 0.6%, worse than estimates of 1.1%, as results in the off-price division were particularly disappointing, increasing just 0.4%, compared to 2.3% growth a year ago. Total revenue in the quarter increased 5.8% to $3.56 billion, beating estimates of $3.46 billion; however, adjusted for the shift in the company's Nordstrom Rewards loyalty event, the figure would have been about even with expectations. 

The slowing growth in the company's off-price division is concerning as the retailer continues to add more Rack stores, which has been seen as a main avenue for growth for the company. However, with comps decelerating in that area, the company may want to reconsider that expansion strategy. 

On the bottom line, adjusted earnings per share increased from $0.43 to $0.51, topping estimates for $0.44. In spite of that beat, investors remained focused on sales performance as the market has been skeptical of the department store sector. 

Digital sales were up 18% in the quarter and now make up 29% of total sales.

Now what

Nordstrom maintained its comparable sales outlook for the year, calling for a 0.5%-1.5% increase in that category, and lifted its earnings-per-share forecast slightly from $3.30-$3.55 to $3.35-$3.55. 

Given that improved outlook, the sell-off seems surprising. Nordstrom is a stronger business than the market is giving it credit for and is in a better position than many of its peers. Today's slide could be a good buying opportunity.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Nordstrom. The Motley Fool has a disclosure policy.

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