Reports surfaced last week that the Nordstrom (JWN 51.55, +1.16, +2.3%) family was attempting to take the company private. Financing uncertainty a few days ago quelled some investor speculation ahead of last night’s Q4 print. All told, Nordstrom reported worse than expected Q4 earnings and gross margins with in-line FY18 guidance to boot. This seems to be enough for investors, as the stock holds up today in the face of a weaker broader market.
Earnings for Q4 fell short of expectations at $1.20, which exclude a $0.25 charge primarily related to its income tax provision and a one-time pretax investment in its employees of $16 million or $0.06. Total company net sales were $4.6 billion for Q4, up 8.4%, inclusive of about $220 million, or 520 basis points, from the 53rd week. Total company comparable sales for Q4 increased 2.6%.
Retail gross profit -- which missed market expectations -- came in at 35.6% for Q4, a decline of 42 basis points compared with the same period in fiscal 2016, mostly due to higher occupancy expenses related to new store growth for Nordstrom Rack, Canada and the New York City Men's flagship. Merchandise margin performance was in-line with the company's expectations, reflecting continued strength in regular price selling trends. Ending inventory increased 6.9% compared to last year, generally in-line with the company's expectations.
Looking into FY18, Nordstrom raised earnings expectations to $3.30-3.55 (from previous $2.90-2.95). Net sales are now expected to be between $15.2-15.4 billion for the year (compared to prior expectations for growth of about 4%, which equates to about $15.08 billion). Comps as a percentage of sales are expected between 0.5-1.5%.
The slim gains post report keeps the Nordstrom family’s plans to pursue a going private deal in the realm of possibility. The financing issue still remains, though, but given that sales are still growing at a decent rate, the turnaround plan still holds some credence.