After the close last night, apparel retailer
Nordstrom (JWN 45.83, -5.08, -9.98%) issued Q1 results and provided an updated outlook for FY19
(ending January 31). At first glance, the results look pretty solid as the
company beat on both the top and bottom lines, while also raising the low end
of its FY19 profit forecast. However, investors seem to be less than impressed
as the stock is currently trading lower by 9% in early morning trading.
Part of the issue could be that the stock ran higher into the print last night, gaining about 10% over the past month. So, there could be a bit of a sell-the-news reaction going on. From a fundamental standpoint, investors may also be disappointed with the company's same store sales performance, as well as its revenue outlook for FY19.
First, the good news. For the quarter, JWN reported EPS of $0.51, beating the consensus estimate by $0.06. This was a nice turnaround from last quarter's $0.03 bottom line miss. Also, on a year/year basis, EPS increased by 11%. This is despite the fact that gross margin slipped by 21 basis points to 34.1%, due to higher occupancy expenses related to U.S. and Canada Rack openings. Helping to offset this was that the company had a good handle on its SG&A costs, which were up a modest 6.8% for the quarter, as well as a year/year reduction in interest expense.
On the top-line, revenue climbed by 6% to $3.47 bln, also ahead of the $3.39 bln consensus. Comparable store sales were up 0.6%, coming up short vs. analysts' +1.2% expectation, and a sharp slowdown from Q4's +2.6% performance. Much of JWN's year/year growth, therefore, was attributable to a shift of the Nordstrom Rewards loyalty event into Q1, relative to 2Q17. In other words, if this one-time event were excluded, JWN's top-line growth would not look quite as strong.
Adding to the top-line concern is that JWN did not raise its FY19 revenue guidance, despite the upside Q1 report. Instead, it reaffirmed its outlook for revenue of $15.2-$15.4 bln, still below the $15.7 bln consensus. Furthermore, its comparable store sales growth of +0.5-1.5% was left unchanged.
On the positive side, JWN did raise the low end of its EPS guidance to $3.35-$3.55 from $3.30-$3.55, in-line with the $3.44 consensus.
With the combination of the stock indicating loftier expectations by running higher into the report together with the disappointing top-line performance and outlook, has investors heading for the exits today.
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