By Eric Smith
Nordstrom Inc. shares skyrocketed on Friday—the day after a stellar quarterly earnings report—increasing $6.94, or 13.3 percent, at market close to secure the company’s spot as the standout department store performer in the second quarter.
Department stores performed well enough in Q2, with Nordstrom, Macy’s and Dillard’s all beating analysts’ expectations for the quarter, but issues remain, starting with J.C. Penney.
J.C. Penney’s shares plunged nearly 25 percent Thursday following a quarterly report that analysts called “abysmal,” “dismal” and “dreadful.” The retailer, which suffered revenue loss due primarily to closed stores, revised downward the company’s 2018 outlook.
Kohl’s and Stage Stores will release earnings next week, rounding out the picture of department stores in Q2 and providing a better idea of what’s in store for the remainder of 2018.
Here’s a rundown of the department store earnings that came out this week:
The 411 – Nordstrom Inc. reported net earnings of $162 million in the second quarter ended August 4, compared with $110 million during the same period in fiscal 2017. Earnings per diluted share were 95 cents, exceeding company expectations and beating Wall Street estimates by 11 cents. Total company net sales increased 7.1 percent for Q2 compared with the prior-year quarter. The company increased digital sales by 23 percent in the second quarter, compared with 20 percent for the same period last year. Digital sales represented 34 percent of sales in the quarter, up from 29 percent a year ago.
Reaction – “We believe we are leading the future of retail through our customer strategy centered on three strategic pillars: providing a compelling product offering, delivering outstanding services and experiences and leveraging the strength of the Nordstrom brand. We are confident in our path forward and are well-positioned to achieve our financial plans for the year and over the long run.”
–Blake Nordstrom, Nordstrom co-president
What’s next? – The strong EPS showing reflected top-line growth across Nordstrom’s full-price and off-price businesses. Based on first-half results, the company raised full-year earnings per diluted share expectations to $3.50 to $3.65, up from the company’s prior outlook of $3.35 to $3.55. From a comp perspective, Nordstrom raised the company’s full-year expectations from a 0.5 percent to 1.5 percent increase to a 1.5 percent to 2 percent increase. This assumes a continuation of underlying sales trends in the second half of the year.
The 411 – J.C. Penney Co. Inc. reported a net loss for the quarter ended August 4 of $101 million or (32) cents per share. Adjusted net loss was $120 million, or (38) cents per share, compared to an adjusted net loss of $23 million, or (7) cents per share, for the second quarter last year. The company reported total net sales decreased 7.5 percent to $2.76 billion in the second quarter, primarily due to the 141 stores that closed in fiscal 2017. Comparable sales increased 0.3 percent for the second quarter, but analysts expected a 1 percent comp increase for the company.
Reaction – “This quarter we adjusted our approach to inventory management from ‘buying to store capacity’ to ‘buying and chasing’ into demonstrated sales trends. Inventory receipts continued to outpace total sales performance this quarter due to prior purchase commitments. As such, we took necessary actions to mark down and clear excessive inventory positions across many of our categories, which encompasses more than just seasonal product or fashion misses. We will continue to take actions to right-size our inventory, better curate our assortment and most importantly provide a solid foundation that we can continue to build upon as we move forward.”
–Jeffrey Davis, J.C. Penney CFO
What’s next? – The inventory management issues that Davis outlined caused the company to revise the company’s 2018 full year guidance. J.C. Penney now expects comparable store sales to be approximately flat and adjusted earnings per share to be ($1.00) to ($0.80).
The 411 – Macy’s Inc. beat Wall Street’s earnings and revenue expectations in the second quarter ended August 4. Net income attributable to Macy’s shareholders for Q2 totaled $166 million, or 3 percent of sales, compared to $111 million, or 2 percent of sales, for the second quarter of 2017. The company reported earnings per diluted share of 53 cents, or 70 cents, excluding impairment and other costs, settlement charges and losses on the early retirement of debt. This compares to 36 cents per share in the second quarter of 2017, or 46 cents, excluding settlement charges and gains on the early retirement of debt. The company reported revenue of $5.57 billion, a decrease of 1.1 percent from Q2 2017 but ahead of analysts’ estimates by $20 million.
Reaction – “The combination of healthy stores, robust e-commerce and a great mobile experience is Macy’s recipe for success. We are focused on improving our customer journey every step of the way because we know that our customers expect a great experience whenever and wherever they engage with our brands. We also continue to be disciplined with inventory management, which allows us to give our customers more fashion and freshness, while increasing sales and improving gross margin.”
–Jeff Gennette, Macy’s Inc. CEO
What’s next? – Macy’s updated the company’s guidance for fiscal 2018. The company now expects adjusted earnings per diluted share of $3.95 to $4.15 in fiscal 2018, excluding anticipated settlement charges related to the company’s defined benefit plans as well as impairment and other costs. Total sales are expected to range from flat to a 0.7 percent increase in fiscal 2018.
The 411 – Dillard’s Inc. reported a net loss for the 13 weeks ended August 4 of $2.9 million, or 10 cents per share, compared to a net loss of $17.1 million, or 58 cents per share, for the prior year second quarter, beating Wall Street estimates by 35 cents. Net sales for the 13 weeks ended August 4 and the 13 weeks ended July 29, 2017, were $1.468 billion and $1.427 billion, respectively. Q2 sales beat analysts’ estimates by $30 million.
Reaction – “While we are not happy with a loss for the quarter, our 32 percent improvement in year-to-date pretax income is a positive. We believe this reflects the continued strength of our customers and their interest in our merchandise selections, and it is encouraging as we head into the important back half of the year.”
–William T. Dillard II, Dillard’s CEO
What’s next? – Dillard’s didn’t issue guidance in the company’s quarterly report.
Photo courtesy Nordstrom Inc.