Nordstrom racked by Macy’s good Numbers

Investors are too quick to flee retailer’s generally good numbers, as online sales and new stores should boost sales

Macy’s cheery report on Wednesday, May 16, 2018, when it posted strong first-quarter earnings, was a positive sign for retail—and a welcome rebuff of the notion that the sector is doomed. It was not so great for Nordstrom, however, which was put in the unenviable position of having to follow Macy’s act.

Nordstrom’s men’s store in Manhattan (New York), USA

On May 17, the department store reported first-quarter earnings of 51 cents a share, beating analysts’ expectations of 43 cents a share, and revenue of USD 3.56 billion, a 6.3 % increase from the same period last year. Yet shares tumbled over 6 % in after-hours trading, in part because same-store sales only rose 0.6 % year-over-year.

“Department stores are measured against themselves, and Macy’s set a tough bar,” says Simeon Siegel, an analyst at Nomura Securities. At least Nordstrom did better than J.C. Penney , whose shares fell 12 % after it reported earnings Thursday morning.

The short-term stock move is not a good indicator of Nordstrom’s longer term prospects.

Nordstrom opened its first brick-and-mortar store in Manhattan last month—a men’s store—that signals its bet both on male shoppers, one of the fastest-growing sectors in apparel, and on New York, its biggest online sales area in North America. The store apparently breaks retail rules—from a new option to reserve clothes online to try on in-store to a second-floor Clubhouse serving liquor, with which consumers can roam across the store.

A women’s store is slated to open across the street next year.

The company is aggressively chasing e-commerce sales, too. In 2017, 26 % of Nordstrom sales were online. That number should rise to 50 % in a few years, according to the company.

All of this should help to dispel the cloud that has settled over the retailer since a deal to take the company private by the Nordstrom family failed over price. The buyout attempt should actually be encouraging to investors.

“It showed that management is very committed to the future of the company,” says Mr. Siegel.