Nordstrom Shares Hit Six-Month High After Online Sales Drive Surprise Q3 Profit

Nordstrom said digital sales account for more than half of its overall revenues, helping the brick-and-mortar retailer posted a surprise third quarter profit.

Nordstrom Inc.  (JWN) - Get Report shares jumped to a six-month high Wednesday after it posted a surprise third quarter profit thanks to surge in online sales that partly offset an overall revenue slump for the brick-and-mortar retailer.

Nordstrom said profits for the three months ending in October were pegged at 34 cents per share, down 55.5% from the same period last year but well ahead of the Street consensus, which forecast a loss of 6 cents per share. Group revenues were down 16% to $3 billion, Nordstrom said, but more than half of that came from the group's online channels, which rose 37% from last year. 

Looking into the holiday quarter, Nordstrom said sales are likely to be down in the low 20 percent range from last year's levels as the coronavirus pandemic continues to alter retail habits, and sees "a highly promotional and competitive environment in addition to shipping surcharges and premium pay" hitting its bottom line.

Data from, in fact, forecasts a a Thanksgiving shopping weekend that is expected to generate ecommerce sales of just over $39 billion, a 40% increase from last year.

"In this moment of retail disruption, the key to success is moving with speed and flexibility to adapt to the rapid changes in customer expectations," CEO Erik Nordstrom told investors on a conference call late Tuesday. "We're thankful for our team's ability to quickly pivot to serve customers in new ways, positioning us well to capture market share and generate value for our shareholders in the years to come."

"By linking our digital and physical asset at the market level, we're able to offer customers up to 7 times more merchandise selection with two-day delivery or next-day order pickup," he added. "We have now reached scale in 10 of our top markets, which account for more than half of our sales, and we'll continue to roll out our strategy across our top markets."

Nordstrom shares were marked 13.7% higher in pre-market trading Wednesday to indicate an opening bell price of $27.94 each, the highest since March 10 and a move that extends the stock's six-month gain to around 66%.

"Nordstrom is one of our favorite names heading into 2021 as we think it's well positioned in a reopening scenario (joining Revolve Group and rideshare)," said KeyBanc Capital Markets analyst Edward Yruma, who carries an overweight rating with a $30 price target for the stock. "3Q results were ahead of our above-cons. expectations, and inventories (-27% y/y) remain in solid shape."

"2021 should see an acceleration, particularly in 2H, as a potential fashion shift as well as renewed focus on work/travel/gathering drive incremental apparel demand." Yruma added. "Holiday remains a bit of an unknown this year, but low industry inventory as well as a bias towards gifting “things” augurs well for holiday."