Nordstrom Beats Weakened Views

Shares soar as the retailer offers a stronger-than-expected guidance for the year.
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Updated from 5:13 p.m. EST

SAN FRANCISCO -- Upscale department store

Nordstrom

(JWN) - Get Report

posted a healthy rise in profits for the third quarter, beating analysts' estimates and its own lowered guidance.

The Seattle-based retailer, which has seen its stock battered amid fears of a consumer slowdown spreading to the upper spending echelons, also offered a profit view for the year that was above analysts' targets. Shares were jumping $3.18, or 10%, to $33.70 in after-hours trading Monday.

Nordstrom earned $165.7 million, or 68 cents a share, in the third quarter, up from $135.7 million, or 52 cents a share, in the same period last year.

The results included a gain of $20.9 million, or 9 cents a share, from the sale of the company's Falconnable business. But even when the gain is excluded, the results exceeded analysts' average forecast for earnings of 52 cents.

In October, Nordstrom lowered its guidance to 50 cents to 53 cents from its previous forecast of 61 cents to 64 cents amid below-plan sales and rising inventory.

Sales in the quarter ended Nov. 3 totaled $1.97 billion, compared with $1.87 billion a year ago. That met analysts' expectations. Same-store sales, or sales at stores open at least a year, grew 2.2%, within the company's revised low to mid-single digit same-store sales outlook.

Nordstrom's gross profit fell 38 basis points, with its merchandise margin rate hurt by increased markdowns. The company said it has made progress with controlling its inventory and expects it to be in line with its plan by the end of the year.

For the year, Nordstrom expects same-store sales to increase 3% to 4%. Earnings are estimated to range from $2.87 to $2.91, including the Falconnable gain and other one-time items.

Excluding the gain, Nordstrom sees earnings of $2.78 to $2.82 a share for the year. While the company' prior guidance called for earnings of $2.80 to $2.86, the new forecast tops analysts' mean estimate for full-year earnings of $2.76.

For the fourth quarter, same-store sales are expected to be flat, with earnings of 88 cents to 92 cents. Analysts predict fourth-quarter earnings per share of 94 cents.

Nordstrom's board also authorized an additional $1 billion in share repurchase, bringing its total authorization to $2.5 billion. The retailer has already repurchased about 16.4 million shares in the third quarter for $750 million, representing about half of the $1.5 billion share repurchase program authorized at the beginning of the quarter.

Nordstrom's stock has fallen 36% since the start of the third quarter as investors fear that a consumer slowdown will cause middle-income shoppers to cut back on so-called aspirational luxury goods. Already,

Coach

(COH)

, an upscale seller that attracts many middle-income customers who splurge on its accessories, has warned that it has seen slowing traffic trends.