Why Nordstrom, Inc. Stock Popped Today

MarketsMotley Fool

What happened

Shares of Nordstrom, Inc. (NYSE: JWN) are popping today, up 11.2% as of noon EDT, after the department-store chain turned in an impressive second-quarter earnings report. The high-end retailer showed off strong growth in digital sales and quelled concerns that arose in July when it cut its full-year sales guidance.

Continue Reading Below

So what

Nordstrom executed in all aspects of its business, as comparable sales rose 4%, up 4.1% in its full-price division and 4% in off-price, which includes Nordstrom Rack. Digital sales rose 23% in the quarter and now make up 34% of total revenue, showing the company is ahead of the curve in e-commerce.

Overall revenue in the period increased 7.2% to $4.07 billion, topping estimates of $3.99 billion, and gross margin improved 91 basis points thanks to higher product margins from better full-priced selling trends and operating leverage from the increase in comparable sales.

Due to those numbers and a lower tax rate from tax reform, earnings per share surged from $0.65 to $0.95, well ahead of expectations of $0.84.

Now what

Looking ahead, Nordstrom also signaled that its momentum would continue, raising its guidance for the year. The retailer now sees full-year revenue of $15.4 billion-$15.5 billion, up from a prior range of $15.2 billion-$15.4 billion, and it expects comparable-sales growth of 1.5%-2%, up from a previous forecast of 0.5%-1.5%.

On the bottom line, Nordstrom now expects EPS of $3.50-$3.65, up from the earlier guidance for $3.35-$3.55 in EPS.

With online sales continuing to surge and profitability improving, Nordstrom is showing why it's a best-in-class department store. As long as the economy remains strong, I'd expect this momentum to continue.

10 stocks we like better than NordstromWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Nordstrom wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Nordstrom. The Motley Fool has a disclosure policy.