Check out the latest Nordstrom earnings call transcript.
What happened
Shares of Nordstrom (JWN +0.00%) were sliding after the high-end department store chain joined its peers by reporting disappointing holiday sales. After stocks like Macy's (M +0.52%) and Kohl's (KSS +1.19%) fell last week on weak reports, Nordstrom shares gave up 6.6% as of 11:23 a.m. EST today.
So what
Nordstrom said comparable sales rose 1.3% for the nine-week period ended Jan. 5, which resembled results at its rivals, as Kohl's saw comps rise 1.2% and at Macy's they increased 0.7%. However, those numbers marked a slowdown from their pace earlier in the year and were significantly worse than 5.1% growth in overall holiday sales in the industry and a 7.9% jump in the apparel category, according to Mastercard SpendingPulse.
An artist's rendition of the new Nordstrom women's store in Manhattan. Image source: Nordstrom.
At Nordstrom, performance in its full-line segment was disappointing, as comps rose just 0.3% over the holidays, down from 1.9% growth over the first three quarters of the year. Growth in the off-price channel, which includes Nordstrom Rack, was stronger at 3.9% and was consistent with year-to-date trends and expectations. Digital sales increased 18% and made up 36% of total sales.
Though overall year-to-date comparable sales are up 2.1%, in line with guidance at 2%, management acknowledged that results in the full-line segment were disappointing and lowered its earnings guidance to account for increased markdowns to reach appropriate inventory levels for the end of the year.
As a result, the company now expects adjusted earnings per share to come in at the low end of its previous range of $3.55 to $3.65, which excludes a one-time credit charge of $0.28.
Now what
Nordstrom shares hit a 52-week low on the news, falling as low as $43.05 today. Though it's disappointing to see full-line comparable sales underperform, weak traffic in the broader department-store sector seems to be the real culprit here, as its peers including J.C. Penney all reported underwhelming comps.
However, Nordstrom continued to show solid growth in its off-price channel, so there's little reason for investors to panic, and the opening of its new flagship Manhattan women's store later this year should help juice full-line sales. At its current price, the stock is trading at a modest P/E of 12.5 based on the low end of its earnings guidance this year, arguably making this a buying opportunity. Still, investors will want to keep their eye on full-line sales in the coming quarters, as that remains the company's biggest vulnerability.
