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Why Nordstrom Stock Was Sinking Today

By Jeremy Bowman – Updated Apr 19, 2019 at 6:48PM

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Shares of the department-store chain dipped on weaker-than-expected holiday sales.

Check out the latest Nordstrom earnings call transcript.

What happened

Shares of Nordstrom (JWN 24.79%) were sliding after the high-end department store chain joined its peers by reporting disappointing holiday sales. After stocks like Macy's (M 0.20%) and Kohl's (KSS 2.02%) 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.

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.

Jeremy Bowman owns shares of J.C. Penney. The Motley Fool owns shares of and recommends Mastercard. The Motley Fool recommends Nordstrom. The Motley Fool has a disclosure policy.

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