Shares of Nordstrom (NYSE: JWN) were going on the discount rack today after the high-end department store chain and off-price retailer posted underwhelming results in its first-quarter earnings report and slashed its outlook for the year. Tracking with a trend in its department store peers, Nordstrom's top and bottom lines both missed the mark as the company blamed "executional misses" for the weak performance. As of 12:28 p.m., the stock was down 9.5%.
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Overall revenue fell 3.3% in the period to $3.44 billion, widely missing estimates at $3.57 billion. Performance in its full-line division was especially troubling as net sales fell 5.1%, compared with a 0.6% decline in its off-price segment. Digital sales, which has been a bright spot for the company, grew just 7% in the quarter, and made up 31% of total sales.
Nordstrom stopped reporting comparable-store sales, because it said in its previous report that it believes net sales are now a reasonable approximation of comps.
Further down the income statement, gross margin declined 60 basis points to 33.5% due to planned markdowns to trim inventory and because of the decline in comps, which caused occupancy costs to rise as a percentage of sales. Selling, general, and administrative expenses rose 168 basis points to 34% as fixed expenses deleveraged as well. As a result, operating income fell by nearly half to $77 million, and EPS plunged from $0.51 to $0.23, well below expectations at $0.43 a share.
Co-president Erik Nordstrom expressed disappointment with the results:
Though Erik Nordstrom sees potential for improvement, the company's full-year outlook wasn't very encouraging. Management slashed EPS guidance from a range of $3.65 to $3.90, to a range of $3.25 to $3.65. It also said it now sees net sales landing between a 2% decline and flat, compared to its prior outlook of 1% to 2% growth.
After today's sell-off, the stock is at an eight-year low near $34, a sign of how far things have unraveled since the board rejected a buyout offer from the founding family to take it private at $50 a share. Nordstrom has some positive catalysts to look forward to, including the opening of its new flagship in New York, but it's clear the company is in a hole after the latest quarter.
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