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Nordstrom: Earnings Beat, Revenue Misses (Update 1)

Stocks in this article: JWN WMT KSS M

This story has been updated from 4:53 pm ET with additional information.

NEW YORK ( TheStreet) -- Nordstrom's (JWN) disappointing second-quarter sales and lower guidance for the rest of the year is further confirmation that the retail sector had a tough second quarter.

The Seattle-based department store said Thursday afternoon that net earnings of $184 million, rose 18% over the 2012 quarter. Earnings of 93 cents a share came in above Wall Street expectations of 88 cents.

And while revenue rose 6.3% over the second quarter of last year to $3.19 billion, it was below Wall Street expectations. Analysts on average estimated the company to report revenue of $3.29 billion, according to Thomson Reuters.

Nordstrom shares fell 2.9% to $57.58 in after-hours trading.

The company's total same-store sales in the quarter rose 4.4%, which includes its full-line, Nordstrom Rack and online direct sales. However, full-line same-store sales decreased 0.7% compared with last year's increase of 1.1%, offset by direct sales which jumped 37% in the quarter, it said.

Nordstrom Rack same-store sales increased by 2.4% percent.

The company said that sales trends "showed moderate improvement" compared to the first two months of the year, but remained softer than anticipated. Nordstrom noted its "disciplined execution of inventory and expenses."

The company's Anniversary Sale added 250 basis points to second quarter same-store sales and 6 cents a share to earnings.

Nordstrom reduced its full-year EPS guidance to $3.60 to $3.70 from the previous guidance range of $3.65 to $3.80. It also lowered its same-store sales growth expectations for the year to between 2% and 3% from 3% and 5%, and said that third-quarter same-store sales would likely come in below the new target.

It's no secret that Nordstrom is shifting its business to generate new customers.

Over the next five years it believes that half of the company's sales will be derived from Nordstrom Rack, its discount department chain, sales online and its expansion in Canada, areas where the company has been making investments, which will limit margin expansion as the company continues to expand, CFO Michael Koppel said on the earnings call.

Going forward, the company expects "moderate growth" in its full-line stores, while it accelerates its expansion of Nordstrom Rack stores and "aggressive growth" as it invests in its e-commerce initiative.

As retail sector earnings proceed full throttle, Nordstrom's mixed results come after bellwether retailers Wal-Mart Stores (WMT) and Macy's (M) each blamed softer sales on a consumer still mired in debt and stagnant wages.

Kohl's (KSS) also reported second-quarter earnings on Thursday but had somewhat better results.

"We're in a business that tends to travel in cycles. We've had a very strong last three years coming off the recession," Nordstrom's Koppel said on the call. "We feel very good about the future and we think this is just one of those shorter-term blips within a long cycle."

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to:

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