What Happened:
Shares of luxury department store chain Nordstrom (NYSE:JWN) fell 14.8% in the morning session after the company reported fourth-quarter results and provided a full-year earnings forecast that missed analysts' expectations. Full-year revenue guidance was also underwhelming, with sales growth expected in the range of a decline of 2% to an increase of 1%. The weak outlook is likely the culprit driving down the stock price. In addition, the topline growth was weak, with revenue up 2.3% year on year. Management noted, "We continue to see a cautious consumer that is mindful of discretionary purchases in light of inflation, higher interest rates, and the resumption of student loan payments."
On the other hand, revenue, gross margin, and adjusted EPS outperformed Wall Street's estimates during the quarter. Overall, it was a mixed but weaker quarter for the company.
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What is the market telling us:
Nordstrom's shares are very volatile and over the last year have had 20 moves greater than 5%. But moves this big are very rare even for Nordstrom and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the stock dropped 8.8% on the news that the company reported third quarter results with revenue missing analysts' expectations, while its gross merchandise volume ("GMV") fell by 7.1%. Management highlighted "continued uncertainty and softening consumer spend," and the wind-down of Canadian operations also affected sales metrics. Despite operating income and earnings per share (EPS) surpassing expectations, the negative free cash flow, which was below analyst forecasts, contributed to an overall weaker quarter for the company.
To add insult to injury, this weak performance comes in light of some impressive performance in retail. Department store peers like M (Macy's), specialty retailers like GPS (The Gap), and off-price concepts such as ROST (Ross Stores) reported impressive results in the previous two weeks.
Nordstrom is down 0.7% since the beginning of the year, and at $18.17 per share it is trading 22% below its 52-week high of $23.30 from July 2023. Investors who bought $1,000 worth of Nordstrom's shares 5 years ago would now be looking at an investment worth $406.08.
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