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Nordstrom Stock Drops After Slow Sales Growth

A customer enters a Nordstrom Inc. department store in Santa Monica, California. Photographer: Patrick T. Fallon/Bloomberg

Nordstrom Inc., the largest U.S. luxury department-store chain, missed same-store sales estimates in the most recent quarter as the retail industry tries to lure customers with promotions. The shares fell the most in more than two years.

Sales at Nordstrom stores open at least a year and the brand’s website rose 2.7 percent in the second quarter ended Aug. 2, missing the 3.1 percent that Consensus Metrix had estimated. Its full-line department stores saw sales drop 1.2 percent, compared with projections for growth of 1.2 percent. Total comparable sales at all brands, including Nordstrom Rack and HauteLook, increased 3.3 percent.

The company also said its agreement last month to buy Trunk Club, a men’s online clothing service, will reduce full-year earnings by as much as 5 percent.

“If people are looking for something negative, the full-line comparable sales were down,” Dorothy Lakner, a New York-based analyst at Topeka Capital Markets, said in an interview. “People may be upset about the Trunk Club acquisition. I can just hear people rolling their eyes saying, ‘Not again.’”

Lakner has a buy rating on the Seattle-based retailer’s shares.

The shares fell 5.2 percent to $65.11 at the close in New York, the biggest decline since May 2012.

The company posted quarterly profit that narrowly beat analysts’ estimates and lifted the low end of its annual earnings forecast.

Profit Beat

Net income was 95 cents a share, the retailer said yesterday in a statement. Analysts had estimated 94 cents, on average, according to data compiled by Bloomberg. Nordstrom now expects earnings for the year of at least $3.80 a share, up from an earlier forecast of at least $3.75. Quarterly sales rose 6.1 percent to $3.39 billion.

Nordstrom, which will acquire Trunk Club for $350 million in stock, is looking to reach younger customers shopping in new ways. The retailer expected it would take a few years to develop a product similar to Trunk Club on its own, President Blake Nordstrom said on a conference call.

“It helps them understand a younger customer who isn’t shopping the same way they were shopping 20 years ago,” Lakner said. “Here’s a company who understands the customer doesn’t care about channels, the customer wants to get what they want, when they want it, however they want it.”

Designer Goods

The acquisition is similar to the company’s 2011 purchase of HauteLook Inc., the flash-sales site that sells discounted designer goods for limited periods of time.

In the second half of the year, Nordstrom plans to open 16 Nordstrom Rack stores, its off-price brand. The retailer will also open three full-line stores, including its first store in Canada.

“They’ve increased their relevancy to a broader swath of people,” Tony Scherrer, director of research at Smead Capital Management, said in an interview. The Seattle-based firm, which owns Nordstrom shares, oversees almost $1 billion. “They’re leveraging the core of what they are and who they are in a greater way through different platforms.”

Download: Earnings

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