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Nordstrom shares jump after strong profit delivery, even as weak sales in the second quarter

Nordstrom's stock soared after the company released a mixed earnings report that showed weak sales, but handily beat Wall Street profit estimates.

Its stock rose about 13% in extended trading. Shares were initially up more than 21% after the news.

Here's how the company did, compared to what Wall Street was expecting, according to Refinitiv consensus estimates:

  • Adjusted earnings per share: 90 cents, vs. 75 cents estimated
  • Revenue: $ 3.87 billion, vs. $ 3.93 billion estimated

"We have delivered strong bottom-line results, demonstrating our inventory and expense discipline. We have positioned the quarter in a favorable inventory position and made important strides in productivity," said Erik Nordstrom, co-president of Nordstrom.

Investors traditionally respond well to strong discipline inventory, which Nordstrom cited as a key driver in this quarter's earnings. The company said inventory was down 6.5% over last year, marking the second consecutive quarter of positive spread between inventory and sales. In comparison, Macy's last week said in its second-quarter earnings report that it used heavy markdowns and discounts to clear inventory, as tanked 13% shares that day.

Sales at full-price department stores dropped 6.5% during the quarter ended Aug. 3, while sales at its off-price Nordstrom Racks fell 1.9%.

The company slashed their net sales guidance for the fiscal year and earnings guidance. It forecasts net sales for the year to decrease by about 2%. That previously estimated sales would be flat to 2% down. It also has slightly lower guidance on earnings per share in the range of $ 3.25 to $ 3.50, compared to prior guidance of between $ 3.25 to $ 3.65.

On an unadjusted basis, net income fell by almost 13% to $ 141 million, or 90 cents a share, compared to $ 162 million or 95 cents a share a year earlier.

Nordstrom also said its digital sales, which represent 30% of the business, grew 7%. In the same quarter last year, its digital sales represented 28% of its total sales.

The company is among a host of department stores that is struggling to grow sales. Annual sales at U.S. department stores have dropped 20% from 2017 to 2018, and are on pace to fall further this year, according to the U.S. Census Bureau. Nordstrom's stock has fallen 57% in the past year, valuing the company at $ 4 billion.

Tariffs on Chinese apparel and accessories are also looming over Nordstrom, as retailers across the board work to keep costs low for the consumer.

Nordstrom's first department store for women is set to open in New York City on Oct. 24. It marks the largest single-project investment in the company's history. It also opened a men's store in April 2018 and previously operated only a small handful of off-price Nordstrom Racks in the city.

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