Nordstrom Beat on Earnings, But There's a Few Glaring Negatives

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Investors may have applauded Nordstrom's (JWN) - Get Nordstrom, Inc. (JWN) Report ability to cut costs and maintain earnings power even when sales decline, but a couple key negatives could prove to keep the stock down going forward. 

The stock rose 8.59% to $28.82 a share in premarket trading Thursday, after the company's Wednesday earnings report showed an earnings beat. Nordstrom earned 90 cents per share on revenue of $3.87 billion. Analysts were looking for earnings of 77 cents per share on revenue of $3.92 billion. Nordstrom lowered full-year earnings expectations to $3.25 to $3.50 a share. 

While investors are clearly encouraged by management's ability to protect the company's downside, one analyst points out that, not only did Nordstrom's sales miss expectations, but the quality of the sales miss was worrisome. 

Price discount counting was higher than expected "across the board" Wedbush analyst Jen Redding wrote in a note out Thursday. That's "indicative of [a] fierce competitive environment," Redding said. Nordstrom, like other retail department stores such as Macy's (M) - Get Macy's Inc Report , has been losing to Amazon (AMZN) - Get, Inc. Report and e-commerce over the past decade or so. "We look for more positive sales and promotional trends before becoming more constructive on shares," Redding said. 

Nordstrom has a digital strategy in place, and digital sales as a percentage of total sales is on the rise, but the road going forward won't exactly be easy. 

Related.Jim Cramer: Retail Buys Must Have a Killer Online or a Bruising Offline Presence

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