Nordstrom Surges After Belt-Tightening Effort Bolsters Earnings

Updated on
  • Retailer posts results that beat analysts’ estimates
  • Company has cut spending and inventory in face of slowdown

Customers shop in a Nordstrom Inc. store in downtown Vancouver.

Photographer: Ben Nelms/Bloomberg

Nordstrom Inc., coping with the Ivanka Trump controversy and a persistent department-store slump, is turning to cost cuts and e-commerce to keep investors happy.

The stock rose the most in more than three months after Nordstrom posted profit of $1.37 a share last quarter, excluding some items. That was well ahead of the $1.15 estimated by analysts, despite slower sales in the period.

The results signaled that Nordstrom is making faster progress streamlining its operations than expected. The Seattle-based retailer faces an industrywide decline, which also has hurt Macy’s Inc. and J.C. Penney Co., prompting Nordstrom to scale back capital spending and reduce inventory.

It also helps that Nordstrom is stocking popular brands and bringing products to market quickly, said Credit Suisse Group AG analyst Christian Buss.

“We continue to expect Nordstrom to prove a share gainer in the department-store space,” he said in a research note. “We also expect Nordstrom to be the first to leverage aggressive investments in e-commerce, positioning the company for earnings growth.”

The stock climbed as much as 7 percent to $47.03 in New York, the biggest intraday gain since Nov. 10. Shares of Nordstrom had slipped 8.3 percent this year through Thursday’s close.

Ivanka Trump

The company is coming off a highly public split with Ivanka Trump’s brand, which prompted criticism from the president himself. Donald Trump upbraided Nordstrom for dropping the first daughter’s products, saying the company had treated her unfairly.

But Nordstrom said it had a good relationship with Ivanka Trump’s business and that the decision was made purely due to declining sales. Investors brushed off the incident, sending the shares up 4.1 percent when it happened earlier this month.

The company said on Thursday that there was no discernible impact from Trump’s tweet.

Nordstrom, the largest upscale department-store chain in the U.S., also is trying to boost sales by adding new brands and offering curb-side pickup and other services to customers. Last year, the company added a J. Crew assortment to its website and some stores. To offset declining foot traffic in malls, Nordstrom is investing in e-commerce and off-price offerings.

Nordstrom’s website now accounts for 25 percent of full-price sales, up from 20 percent. The company also benefited from a legal settlement of $22 million.

Still, same-store sales -- a closely watched benchmark -- remain weak. They declined 0.9 percent last quarter. Analysts had estimated a 0.3 percent gain.

The company expects sales to be flat this year on that basis. And earnings are forecast to be $2.75 to $3 a share, excluding some items, a bit shy of the $3.06 predicted by analysts.

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