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Why Nordstrom Inc. Stock Plunged Today

By Jeremy Bowman - Nov 16, 2018 at 12:40PM

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Shares of the high-end retailer fell on a surprise charge in its third-quarter earnings report.

What happened

Shares of Nordstrom (JWN -4.68%) were sliding today after a one-time credit card charge spoiled an otherwise solid third-quarter earnings report. As a result, the stock was down 13% as of 11:09 a.m. EST.

So what 

The high-end department store chain said comparable sales across both its full-price and discount businesses were up 2.3%, pushing total revenue 3% higher to $3.75 billion, which topped estimates at $3.69 billion. Including a $72 million charge after the company found that some delinquent credit card accounts were being charged at a higher rate than they should have been, the company reported earnings per share of $0.39, down from $0.67 a year ago. Adjusting for that charge, EPS was flat at $0.67, beating expectations by a penny.

The exterior of a Nordstrom Rack store.

Image source: Nordstrom.

Growth was largely driven by the off-price channel, which includes Nordstrom Rack and related e-commerce sites, where comparable sales were up 5.8% in the quarter, while its full-price business saw comps increase just 0.4%, weakening from earlier in the year. Digital sales growth continued to be strong, increasing 20%. 

On the earnings call, Blake Nordstrom said the company was poised for a strong fourth quarter and beyond, saying, "We're well-positioned to improve the customer experience and believe our combination of digital capabilities and local market assets; our people, product, and place, make us uniquely positioned for success in the market."

Now what 

Nordstrom also bumped up its guidance for the full year, making the sell-off all the more puzzling. The retailer now sees comparable sales growth of 2%, up from a prior range of 1.5% to 2%, and revenue of $15.5 billion to $15.6 billion, up from $15.4 billion to $15.5 billion. On the bottom line, the company lifted its adjusted EPS guidance from $3.50-$3.65 to $3.55-$3.65. Management also said it expected "to achieve an inflection point for profitable growth this year excluding the non-recurring charge."

Given the surprising sell-off, the stock now looks more appealing, with growth accelerating and the retailer continuing to benefit from tailwinds from the broader economy.

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