Department stores are a mixed bag heading into Black Friday and the 2018 Holiday Season, as companies like Nordstrom Inc. and Macy’s raised guidance with hopes of closing out the year on strong footing while J.C. Penney and Dillard’s continued looking for ways to keep from stumbling.
Here’s a rundown of the department store earnings that came out in the past week:
Nordstrom Lifts Guidance On Improved Q3 Earnings
The 411 – Nordstrom Inc. reported earnings per diluted share for the third quarter ended November 3 of 39 cents, which reflected a non-recurring estimated credit-related charge of 28 cents. Excluding this estimated charge, which was not incorporated in the company’s prior outlook, earnings slightly exceeded the company’s expectations, reflecting continued top-line strength across its Full-Price and Off-Price businesses. Earnings before the charge came in at 67 cents a share, a penny ahead of Wall Street’s consensus estimate of 66 cents. Total company net sales increased 3 percent for the quarter, which included an unfavorable timing shift of approximately 100 basis points, primarily from the reversal of the second quarter impact of the new revenue recognition standard as it relates to the timing of the Anniversary Sale.
Reaction – “In a recent review of credit card accounts, we identified some cardholders with delinquent accounts being charged higher interest in there. We estimate that less than 4 percent of Nordstrom cardholders will receive a refund or credit with most receiving less than $100. We have taken action including the appropriate steps to ensure the problem is addressed and does not happen again. We sincerely apologize to these cardholders. We realized customers and shareholders place a great deal of trust in us and that’s a responsibility we take seriously. Excluding this charge, our third quarter earnings were slightly ahead of our expectations and Anne will provide further details of this matter in her remarks.”
–Blake Nordstrom, Nordstrom co-president
What’s next? – Nordstrom raised revenue expectations by $100 million and adjusted EPS by 5 cents, while the company expects comp growth of around 2 percent. However, Nordstrom stock plunged double digits on Thursday—the day after reporting—due to tightening margins and is back to levels not seen since the beginning of 2018.
Macy’s Lifts Full-Year Guidance On Q3 Beat
The 411 – Macy’s third quarter earnings of 27 cents on an adjusted basis exceeded Wall Street’s consensus estimate of 14 cents. Revenues of $5.40 billion were basically in line of expectations of $5.41 billion. The company also reported comparable sales growth of 3.1 percent on an owned basis, or 3.3 percent on an owned plus licensed basis. Higher sales and earnings driven by strong digital, continued improvement from brick & mortar and execution of the North Star Strategy.
Reaction – “Macy’s, Bloomingdale’s and Bluemercury all performed well. Our strategic initiatives are gaining momentum and delivering results. Another double-digit quarter from our digital business and a strong stores performance combined to help us exceed expectations. We continue to see an improved trend in brick and mortar across the fleet with particularly strong results from our Growth50 stores.”
–Jeff Gennette, Macy’s Inc. CEO
What’s next? – Macy’s updated its annual guidance, including 15 cent increase in earnings per share and is bullish on its prospects heading into the holidays. “The holiday season is when Macy’s truly shines,” Gennette added. “We have the right merchandise, the right marketing and the right customer experiences in place to deliver a strong fourth quarter.”
JCPenney Withdraws Profit Outlook For Year
The 411 – For the third quarter ended November 3, J.C. Penney reported total net sales decreased 5.8 percent to $2.65 billion compared to $2.82 billion for the third quarter ended Oct. 28, 2017. Wall Street expected sales to land at $2.81 billion. The company also reported comparable sales for its fiscal third quarter ended November 3 decreased 5.4 percent. Net loss for the quarter was $151 million or 48 cents per share.
Reaction – “In spite of our overall sales results, I am encouraged by the recent underlying trends in key businesses such as women’s apparel, active, special sizes and fine jewelry. We are making progress and taking the necessary steps to right-size our inventory positions to better support the brands and categories that are demonstrating profitable sales growth. While restoring J.C. Penney to sustained profitable growth will be a lengthy process, I understand the need for quick action. My commitment is that we will make sound, strategic decisions backed by data, and will always be rooted in delivering on our customers’ wants and expectations. We will act swiftly but thoughtfully as we move the business forward. While these things take time, the results we are reporting today only strengthen our sense of urgency and purpose.”
–Jill Soltau, J.C. Penney CEO
What’s next? – J.C. Penney lowered its sales outlook after reporting a shortfall in revenues in the third quarter. The department store also withdrew its guidance for earnings due to the hiring of a new CEO and an interim CFO.
Dillard’s Q3 Misses Wall Street’s Guidance
The 411 – Dillard’s Inc. reported earnings in the third quarter ended November 3 came in well short of Wall Street’s targets as margin pressures offset a 3 percent gain in same-store sales. The company reported net income for the period of $85.1 million, or $3.08 per share, compared to net income of $63.8 million, or $2.14 per share, for the 39-week period ended October 28, 2017. Included in net income for the 39-week period ended November 3 was $2.9 million (10) cents per share) in tax benefits related to additional federal tax credits and an update of the provisional amounts recorded for the income tax effects of the Tax Cuts and Jobs Act of 2017. Net sales for the 39 weeks ended November 3 and for the 39 weeks ended October 28, 2017, were $4.346 billion and $4.201 billion, respectively.
Reaction – “While we are encouraged by our 3 percent comparable sales performance, this was a disappointing quarter as markdowns weighed heavily on gross margin, particularly in the first month. However, operating performance improved as the quarter progressed and sales turned positive. We also invested $54 million in share repurchases during the quarter.”
–William T. Dillard II, Dillard’s CEO
What’s next? – Dillard’s didn’t issue guidance in its quarterly report.
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