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Why Nordstrom, Gogo, and Williams-Sonoma Slumped Today

By Dan Caplinger – Nov 16, 2018 at 4:31PM

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Retailers took a big hit despite some encouraging signs for the overall market.

The stock market managed to post gains on Friday, with certain parts of the market faring better than others as investors reacted favorably to the possibility of a resolution to trade disputes between the U.S. and China. Among major benchmarks, the Dow Jones Industrial Average fared the best, with more modest gains for the S&P 500 and a small decline for the Nasdaq Composite. Despite relatively optimistic views on the U.S. economy, though, some individual companies reported bad news that held their shares back. Nordstrom (JWN -1.18%), Gogo (GOGO 0.83%), and Williams-Sonoma (WSM -3.76%) were among the worst performers on the day. Here's why they did so poorly.

Nordstrom trips before the holidays

Shares of Nordstrom dropped 14% after the company reported its third-quarter financial results late Thursday. The upscale department store retailer said that revenue climbed 3% on a 2.3% rise in comparable sales, but some investors weren't pleased to see comps for the full-price side of the business inch higher by just 0.4%. Despite positive comments from executives pointing to good positioning for the holiday quarter and an increase in guidance for the remainder of the fiscal year, investors seemed to want clearer signs that Nordstrom would be able to evolve its business model to embrace digital sales and fight back against e-commerce competition. That will depend largely on how well concepts like the discount Nordstrom Rack and the new Nordstrom Local perform during the holidays.

Front of new Nordstrom store concept with people outside the entrance and customers in a cafe on the second floor over the entranceway.

Image source: Nordstrom.

Gogo looks for more time

Gogo stock plunged 24% in the wake of the in-flight internet service provider announcing that it would restructure its debt in order to extend maturity dates further into the future. According to the announcement, Gogo will offer convertible notes that mature in 2022 in order to repurchase outstanding convertible notes that are due in 2020. Until the new notes are priced, it's uncertain what the ultimate cost to the company will be, but Gogo warned that some investors who've hedged their bond holdings through positions in the underlying stock could reverse their hedges, creating unusual volatility. Selling shareholders didn't want to deal with that uncertainty, even though the bigger question is whether Gogo will be able to use the extra time to make greater strides toward sustainable profitability.

Williams-Sonoma takes a hit

Finally, shares of Williams-Sonoma fell 11%. The home furnishing retailer said that revenue was higher by more than 4% in the third quarter compared to the same period in 2017, but comparable-brand revenue growth of 3.1% wasn't quite as healthy as some investors had hoped. Sluggish gains in comps at the Pottery Barn, Williams-Sonoma, and Pottery Barn Kids and Teen store concepts held back solid growth at West Elm, and e-commerce revenue was higher by just 8%. With company projections for the holiday quarter that weren't quite as favorable as many following the stock had hoped, Williams-Sonoma shareholders seem to be remaining extremely conservative going into the end of the year.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Nordstrom and Williams-Sonoma. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Nordstrom, Inc. Stock Quote
Nordstrom, Inc.
$16.73 (-1.18%) $0.20
Williams-Sonoma, Inc. Stock Quote
Williams-Sonoma, Inc.
$117.85 (-3.76%) $-4.60
Gogo Inc. Stock Quote
Gogo Inc.
$12.12 (0.83%) $0.10

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