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Nordstrom Missed 4Q15 Sales Guidance on Weak Full-Line Store Sales

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Sales below estimates

The 4Q15 sales of upscale department store Nordstrom (JWN) came in at $4.19 billion, missing the consensus analysts’ estimate of $4.22 billion. The fourth quarter ended on January 30, 2016.

Nordstrom experienced weak sales in its full-line stores in the fourth quarter, which includes the crucial holiday season. Nordstrom operates upscale full-line stores as well as off-price Nordstrom Rack stores. Nordstrom had missed analysts’ expectations in 3Q15 also.

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Subdued sales growth

Nordstrom’s sales, including its credit card revenue, grew by 3.7% in 4Q15, as strong sales growth in the company’s Nordstrom Rack store business and online channels was offset by a 2.5% decline in the full-line physical store sales. Nordstrom’s sales grew by 6% in 3Q15 and by 8.9% in 4Q14.

A tough holiday season and unfavorable warm weather led to increased markdowns in the quarter. Nordstrom ended 4Q15 with a 12% growth in inventory, which exceeded the sales growth in the quarter. The iShares Russell Mid-Cap Growth ETF (IWP) has 0.3% exposure to Nordstrom.

Same-store sales

Nordstrom’s overall same-store sales, including its online channels, increased by 1% in 4Q15. However, the same-store sales of its full-line physical stores and that of Nordstrom Rack physical stores declined by 3.2% and 3.0%, respectively. Same-store sales growth is a key metric for department stores. It measures the change in sales of the existing stores, excluding the impact of stores opened or closed during a period.

On February 4, Kohl’s (KSS) reported a subdued same-store sales growth of 0.4% for 4Q15, citing a weaker-than-expected January due to a soft demand for cold-weather goods. Macy’s (M) reported a 4.7% year-over-year decline in same-store sales on an owned plus licensed basis for the November–December 2015 holiday period. In contrast, JCPenney (JCP) reported a 3.9% rise in its holiday same-store sales driven by its turnaround strategy, which included a focus on private brands.

In this series about Nordstrom’s 4Q15 results, we will discuss the company’s earnings, store growth plans, planned capital spending, and the outlook for fiscal 2016.

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