Nordstrom Breaks Retail's Losing Streak, But This Stock Just Broke a Cardinal Rule

Wall Street hasn't been able to give investors much confidence that the major downturn in the stock market will end anytime soon. As soon as a rally seems to start, something comes in and hurts investor sentiment again. Although the Dow Jones Industrial Average (^DJI 0.56%) managed to pick up ground on the strength of defensive consumer stocks, the S&P 500 (^GSPC -0.88%) and the Nasdaq Composite (^IXIC -2.05%) lost ground.

Data source: Yahoo! Finance.

After the close of the regular trading session, investors got a nice surprise from Nordstrom (JWN 0.96%). Many had feared that after a horrible slate of financial reports from retail stocks  last week, the upscale department store might just follow the downward trend. However, its results were solid. Unfortunately, the same can't be said for InterDigital (IDCC 1.01%), which didn't report its financial results but did make a blunder in doing the wrong thing at the wrong time.

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Nordstrom perks up

Shares of Nordstrom climbed more than 10% in after-hours trading on Tuesday night. The retailer's first-quarter financial report showed strong growth that flew in the face of some of its industry peers.

Nordstrom's best numbers included an 18.7% rise in net sales to $3.47 billion. The high-end Nordstrom  banner stores saw sales jump 23.5%, topping where they were before the COVID-19 pandemic. The discount Nordstrom Rack banner also performed well, although its 10.3% sales increase still fell short of where its top line was prior to the beginning of the pandemic. Digital sales were flat year over year, reflecting the appetite for shoppers to get out of their homes and visit stores.

Even better, Nordstrom managed to eke out a modest profit for the quarter. $20 million of net income isn't huge money, but the resulting earnings of $0.13 per share came in a whole lot better than most investors had expected to see. The bottom-line success came from a nearly two-percentage-point rise in gross profit and a three-percentage-point drop in overhead expenses as a percentage of revenue.

Nordstrom updated its guidance for the full 2022 year, now expecting revenue growth of 6% to 8% and adjusted earnings of $3.20 to $3.50 per share. For a stock trading under $23 per share, even including the after-hours gain, that makes Nordstrom look like an interesting value proposition.

InterDigital looks to modify its capital structure

Elsewhere, shares of InterDigital fell 8% after hours. The mobile and video  technology specialist has seen its stock lose 25% of its value since this time last year, but it apparently decided it had no choice but to go to the capital markets now to raise cash in order to make changes to its capital structure.

InterDigital announced a $350 million private offering of convertible notes. The notes will mature in five years, and the interest rate on the debt and the conversion price into which bondholders can exchange their bonds for shares of InterDigital stock will be determined as part of the overall pricing process.

Part of the reason InterDigital is doing this now is to repurchase similar convertible notes that are coming due in 2024. In addition, the company wants to buy back stock as part of its authorized share repurchase program.

Yet investors aren't thrilled about InterDigital issuing a debt-equity hybrid with interest rates on the rise and the stock price on the decline. That's essentially the worst pricing environment InterDigital could have picked, raising the question of why the company waited until now to move forward with such a decision.