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Nordstrom Stock Leaps As Solid Q1 Sales, Surprise Outlook Boost Defies Retail Gloom

"At this point, we have not seen inflationary cost pressures adversely impact customer spending, which we believe is due to the higher income profile and resiliency of our customer base," said CFO Anne Bramman.

Updated at 11:33 am EST

Nordstrom  (JWN) - Get Nordstrom Inc. Report shares surged higher Wednesday after the mall-focused retailer defied the sector's recent gloom with a narrower-than-expected first loss paired with a boost to its full-year profit forecast.

Nordstrom, which targets a higher-income consumer base, said it hasn't seen a notable impact on demand from the fastest inflation in forty years, adding price increases enacted over the first three months of the year have been largely absorbed.

Still, the Seattle-based retailer lost a penny per share on an adjusted basis for the three months ending in April, but noted sales were up 18.7% to $3.57 billion. Looking into the final months of the year, Nordstrom said it expects adjusted earnings in the region of $3.38 and $3.68 per share, with sales rising as high as 8% from 2021 levels.

"This quarter, our sales growth was supported by pricing actions, favorable mix shift, and transaction growth," CFO Anne Bramman told investors on a conference call late Tuesday. "At this point, we have not seen inflationary cost pressures adversely impact customer spending, which we believe is due to the higher income profile and resiliency of our customer base." 

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"However, we continue to see pressure in labor and fulfillment, and we've been working since last year to deliver offsets through our supply chain optimization initiatives," she added.

Nordstrom shares were marked 9.8% higher in early Wednesday trading to change hands at $22.71 each, a move that would trim the stock's year-to-date decline to around 7.5%.

Inflation, input cost pressures and supply chain snarls have taken their toll on the U.S. retail sector this quarter, culminating in disappointing first quarter earnings and outlooks from giants Walmart  (WMT) - Get Walmart Inc. Report, Target  (TGT) - Get Target Corporation Report and Amazon  (AMZN) - Get Amazon.com Inc. Report this month.

The S&P 500 Retailing Group is down around 24% so far this quarter, its worst performance since 1990, as investors expect more pain to come from both the Fed's rate-based inflation fight and the highest nominal domestic gas prices on record, which continue to pinch household budgets and discretionary spending.

U.S. retail sales growth steadied in April, data from the Commerce Department indicated earlier this week, as record high gas prices and surging inflation failed to deter spending in the world's biggest economy.

Inflationary pressures remain acute, however, even as the Commerce Department's headline April reading eased from a 40-year high to 8.1%, with so-called core inflation, which strips-out volatile components such as food and energy prices, rising 6.2%, near the highest since February of 1991.