Retailer Nordstrom (JWN 39.27, -0.77, -1.9%) reported its third quarter results after Thursday's close. The knee-jerk response was negative, but like Kohl's (KSS 41.17) and Macy's (M 19.50) after their reports yesterday, shares of JWN are fighting to resist the selling pressure.
Overall, the results from Nordstrom weren't bad. They weren't great either, but they could have been worse, which in a relative sense makes them okay.
Net sales increased 2.0% to $3.5 billion, outpacing inventory growth of 1.0%. The snag for some, though, is that comparable sales decreased 0.9% following a 2.4% increase in the same period a year ago. The results would have been worse if not for the comparable sales gain registered in Nordstrom's off-price business.
Full-price stores posted a 1.9% decline in comparable sales, with comparable sales at full-line stores in the U.S. down 4.9%. That weakness was offset by a 7.5% comparable sales increase for Nordstrom.com, which marked a deceleration from the 20.1% growth rate posted in the same period a year ago.
Comparable sales at Nordstrom Rack were down 5.0%, versus a 0.9% increase last year, yet comparable sales for the off-price segment increased 0.8% thanks to a 33.6% increase in comparable sales for Nordstromrack.com/HauteLook.
Evidently, Nordstrom shoppers are gravitating to the retailer's online channel, yet they are doing so to a certain extent at the expense of the company's full-line stores.
Retail gross profit in the third quarter decreased 12 basis points to 34.7% of net sales due mostly to higher occupancy expenses related to new store growth for Nordstrom Rack and Canada. In turn, the company's SG&A expenses increased 161 basis points to 31.2% of net sales on the back of higher technology and supply chain initiatives to support Nordstrom's growth initiatives.
Nordstrom's third quarter adjusted earnings, which exclude an approximately $0.04 impact on its business from the hurricanes, were $0.71 per share.
Shares of JWN dropped as much as 4% in after-hours action, yet that loss has been pared. They are currently down 1.9%.
The company said on its conference call that it wouldn't take any questions on the topic of it potentially going private. In mid-October, Nordstrom said it might possibly pursue a going-private deal after the holiday season concludes.
This holiday season should be quite promotional given the emergence of online competition and consumers' demand for low-price offerings.
Nordstrom narrowed its fiscal 2017 guidance range for earnings per diluted share from $2.85 to $3.00 to $2.85 to $2.95. It was an interesting revision considering its third quarter earnings exceeded analysts' average expectation.
By lowering the top end of its earnings per share guidance range, Nordstrom contributed to a sense that promotional activity might crimp its profitability, particularly since the retailer maintained its guidance for net sales to be up approximately 4% and comparable sales to be approximately flat.
This understanding has tempered investors' enthusiasm and has led to the somewhat guarded response to what can be considered an okay report.