Nordstrom earnings per share falls in Q3
Nordstrom shares tanked as it missed on earnings this quarter. The clothing store reported adjusted earnings per share of $0.57 and revenue of $3.33 billion. Wall Street analysts were expecting earnings per share of $0.72 and revenue of $3.37 billion. The company reported that it will take a deduction of $0.15 per share due to transaction costs to finalize a deal to sell its credit card portfolio.
Nordstrom sold its credit card portfolio to TD Bank for $2.2 billion, netting the company $1.8 billion, $900 million of which was paid out to shareholders through a special dividend. The company intends to repurchase stock with the remaining capital beginning in the fourth quarter.
Nordstrom earned $1.1 billion in gross profit, a slight decrease from 2014, due to higher markdowns on products. It also reported a net income of $81 million, which is a large drop compared to last year when the company reported $142 million.
There were other negatives for Nordstrom in the third quarter. Comparable store sales were up only slightly at 0.9 percent. Ending inventory was also up 8 percent at the end of the quarter. “It’s just a traffic problem,” according to James Nordstrom, president of stores. “We’ve got less people buying clothes this quarter than we expected.” Analysts are dumbfounded, “It’s kind of bizarre, people have money. The economy isn’t bad, but they’re not spending on apparel,” says Dorothy Lakner, an analyst at Topeka Capital Market, according to Bloomberg.
Nordstrom is not the only company experiencing difficulty this quarter. Macy’s also reported reported earnings per share of $0.56 and revenue of $5.87 billion. Earnings for the retailer are down from $0.61 per share compared to the same period last year.
Not all was bad news for Nordstrom. Nordstrom.com net sales increased 11 percent and Nordstromrack.com net sales were up 39 percent. The company also saw an increase of 6.6 percent in net sales to the tune of $3.2 billion compared to the $3.0 billion it reported in 2014. Net sales in its off price business also increased 12 percent compared to the previous year.
Nordstrom also expanded this year. In the third quarter it opened three new full line stores, including its first international flagship store in Vancouver. The company also opened 16 new Nordstrom Rack stores. To date, the company has opened five full line stores and 27 Nordstrom Rack stores. The company says its top performing regions are the Northwest and Southern California.
The company also added 260,000 news accounts in the third quarter to its Nordstrom Rewards Loyalty program. It currently has 4.6 million members and sales from its members increased 8 percent in the third quarter, which accounted for 38 percent of sales.
On the capital side, Nordstrom’s board of directors authorized a buyback of $1 billion worth of shares. For the third quarter, the company repurchased 3.5 million shares for a sum of $250 million. The company recently cut its earnings forecast for the year to $3.30 to $3.40 per share from $3.85 to $3.95.
Shares for Nordstrom are currently down 31 percent for the year.