Nordstrom Profits Soar Past Forecasts — But Sales Will ‘Take Time’ to Bounce Back

Shares for Nordstrom are surging in after-hours trading as investors cheer its better-than-expected second-quarter profits. As of 4:45 p.m. ET, the stock — which had been under pressure on the lead-up to today’s financial results — was approaching gains of 13% to $29.89.

Overall, however, it was mixed Q2 finish for the Seattle-based department store chain: Profits declined 13% year over year to $141 million, or 90 cents per share, but significantly bested analysts’ forecasts of 75 cents per share. Meanwhile, sales tumbled 5% to $3.78 billion — a deceleration the firm attributed to “a challenging start” to the quarter as well as softer performance for its Anniversary Sale and Off-Price business — and missed Wall Street’s bets of $3.93 billion.

Its bottom-line beat, the company said, resulted from “strong inventory discipline” — Q2 inventory was down 6.5% — as well as “significant expense efficiencies” across the business.

“We exited the quarter in a favorable inventory position and made important strides in productivity,” noted co-president Erik Nordstrom. “We’re focused on driving our top-line, and while this can take time, we are confident in our ability to manage through cycles. We remain encouraged by our key initiatives, including our local market strategy, and are making good progress on key areas of focus that we believe will collectively drive increased value creation for our shareholders.”

In just the past year, the company shouldered a failed go-private attempt, uneven sales and the sudden passing of co-president Blake Nordstrom in January. Still, it has often outperformed many of its peers amid a supposed retail apocalypse and wider industry disruption that peaked around 2017.

Insiders have long credited Nordstrom’s innovative concepts, focus on service and growing omnichannel savvy — including offerings like buy online, pick up in store (BOPIS) service, a revamped loyalty program and experiential store offerings — as key factors in its overall success.

Nordstrom said today that it would continue to throw support behind such concepts, noting its ongoing plans to expand its local market strategy to New York City, its largest market for online sales, with the opening of its flagship store on Oct. 24 and two Nordstrom Local neighborhood hubs in September.

Nevertheless, the company lowered its full-year outlook, and now expects net sales to decrease 2% — compared to its prior range of flat to down 2%. It also lowered the high-end of its EPS forecast: it now expects profits in the range of $3.25 to $3.50, compared with the prior range of $3.25 to $3.65.

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