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Nordstrom’s Stock Value Wavers in After-Hours Trading Following Q1 2020 Earnings Miss, Efficiency Gains

By Rhian Hunt – May 28, 2020 at 6:58PM

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The company took a bigger hit than anticipated, but still has good liquidity.

Investor reaction to Nordstrom's (JWN -2.23%) first-quarter 2020 earnings report seems mixed, at least as indicated by after-hours trading, with share prices rapidly see-sawing between positive and negative territory. The high-end retailer reported on its first-quarter earnings today, revealing a strong COVID-19-related sales drop and both earnings per share (EPS) and revenue falling significantly short of investor consensus.

The company's earnings per share missed both GAAP and non-GAAP Wall Street expectations, coming up at -$2.25 and -$0.96, respectively. Analysts forecast revenues would amount to $2.27 billion, or $150 million more than the $2.12 billion Nordstrom actually managed to deliver. Just yesterday, investors bid up the company's shares nearly 15% based on expectations. 

Nordstrom Rack exterior

Image source: Getty Images.

The quarter started strongly, according to Nordstrom's earning release, but sales collapsed under the impact of the coronavirus pandemic. Overall, sales plunged 40% year over year. The quarter's net loss was $521 million.

Balancing out these negatives, Nordstrom reports that it has boosted its efficiency, cutting costs and inventory. Inventory is 25% lower, and the company has also slashed overhead by 20% and cash burn by 40%. Pointing out the retailer's solid liquidity position, CEO Erik Nordstrom also said it was "entering the second quarter in a position of strength, adding to our confidence that we have sufficient liquidity to successfully execute our strategy in 2020 and over the longer term."

The report also notes continued momentum in both e-commerce and the "off-price" segment, leading the company to take "proactive steps" to respond to "acceleration of these longer-term customer trends." However, the data also shows Nordstrom Rack, its off-price chain, lost 45% of sales compared to only 36% at the main, high-end Nordstrom locations.

Rhian Hunt 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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