Nordstrom Tumbles After Credit Card Charge, Q3 Same-Stores Sales Miss

Nordstrom Inc. (JWN) shares tumbled Friday by nearly 14% to close at $50.93, after the retailer posted weaker-than-expected same store sales for its fiscal third quarter and said it would need to repay more than $70 million to customers overcharged on store credit cards.

Nordstrom said sales in store open more than one year rose 2.3% in the three months ending on October 28, but noted the "full-price" sales were only up 0.4% from the same three-month period last year. The group guided for full-year earnings in the range of $3.55 to $3.65 per share, topping the Street consensus, but the $72 million charge it was forced to take in the third quarter rattled investors and pushed its share sharply lower. Nordstrom also said it sees Christmas quarter sales rising around 2% from last year, and net full-year revenues of around $15.6 billion after hitting $3.748 billion in the October end quarter.

"In a recent review of credit card accounts, we identified some cardholders with delinquent accounts being charged higher interest in error," CEO Anne Bramman told investors on a conference call late Thursday. "This occurred as a result of settings implemented in 2010. We estimate that less than 4% of Nordstrom cardholders will receive a refund or credit, with most receiving less than $100."

"We are currently assessing the impact to each individual account and will communicate directly with impacted cardholders," she added. "Excluding this charge, we expect to achieve an inflection point for profitable growth this year."

Analysts at KeyBanc Capital Markets said that, once you strip away the one-off credit card charge, Nordstrom's quarter was solid, but certainly not spectacular. 

"Rack continued to show improved performance and full-line was largely consistent with management expectations," analyst Edward Yruma said. "At this stage, we think comps are unlikely to accelerate from current levels and do not see material upside to our estimates." 

Nordstrom's report capped a mixed series of readings for the U.S. retail sector Thursday, with the Commerce Department saying nationwide retail sales rose by a stronger-than-expected 0.8% last month and Walmart posting end-October sales of more than $126  billion.

However, JC Penney Company Inc. (JCP)  posted disappointing same-store sales figures that highlight the retailer's struggles in a competitive market that has already pushed Sears Holdings into Chapter 11 bankruptcy despite a surge in consumer sentiment and spending.

JC Penney's difficulties suggest its not getting new customers from Sears, with Wednesday's stronger-than-expected third-quarter earnings from from rival Macy's Inc. (M) indicating that cash-rich shoppers are growing increasingly attracted to its higher-scale offerings and newly-launched online platform.

Macy's said adjusted earnings for the three months ended on Nov. 3, came in at 27 cents a share, up 17% from the same period last year and well ahead of the Street consensus of 14 cents per share. Group revenues, the company said, slipped to 5.404 billion but matched the market's forecast. Comparable store sales rose 3.3% on an owned-plus licensed basis, Macy's said, adding it now sees full-year sales to rising between 0.3% and 0.7% and tacked 15 cents to its prior earnings estimate of $3.95 to $4.15 a share.

"Our strategic initiatives are gaining momentum and delivering results. Another double-digit quarter from our digital business and a strong stores performance combined to help us exceed expectation," said CEO Jeff Gennette. "We continue to see an improved trend in brick and mortar across the fleet with particularly strong results from our Growth50 stores."

"The holiday season is when Macy's truly shines. We have the right merchandise, the right marketing and the right customer experiences in place to deliver a strong fourth quarter," he added.

Macy's had said earlier this year that it would hire an additional 80,000 temporary workers over the holiday shopping season, which unofficially kicks-off with next week's Black Friday event, amid the best prospects for U.S consumer spending in at least 10 years.

(This story was updated to show Friday's close prices.)

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