US Department Store Industry Was Slaughtered By Investors, Nordstrom's Share Price Plummeted

- Sep 15, 2019-

Following the mid-range department store JC Penney Co. Inc. (NYSE: JCP) Penny and Kohl's Corp. (NYSE: KSS) Coles announced a poor first-quarter performance, the chain of luxury goods department Nordstrom Inc. (NYSE: JWN) Connaught Destron's start in 2019 was not smooth, and e-commerce was particularly worrying.


JC Penney Co. Inc. (NYSE:JCP) and Kohl's Corp. (NYSE:KSS), which reported earnings before the close, fell 7.4% and 12.4% respectively on Tuesday, while Nordstrom Inc. (NYSE:JWN) was heavy after the market. Frustrated by 11.5%.


In the first quarter of fiscal year 2019, May 4, the digital business, which accounted for 31% of Nordstrom Inc.'s total revenue, recorded only a 7% year-on-year increase, compared with 16% in the fourth quarter and 25% in the same period last year. Slowly, it also underperformed Macy's Inc. (NYSE:M) Macy's, the largest department store in the US with double-digit growth.


Coupled with the weak sales of women's full-price, and the digital-priority new membership plan weakened the physical passenger flow by ignoring traditional customers. In the first quarter, the group's total revenue fell 3.3% year-on-year to 3.443 billion US dollars, less than the market expectation of 3.58 billion US dollars, full price sales. And discount sales recorded a decline of 5.1% and 0.6% respectively. The group did not provide comparable sales data.


Other department stores also have their own troubles. JC Penney Co. Inc. disclosed that comparable sales declined in the first quarter from 1.8% in the same period last year to 5.5%, much higher than market expectations of 4.2%, partly due to the end of the appliance business; blaming the weather as expected. Corp.'s comparable sales also fell 3.4%, while market expectations fell by only 0.5%; Macy's Inc. Macy's Group increased slightly by 0.7%; discount department store TJX Co. Inc. (NYSE: TJX) achieved 5% strong growth.


Since the US retail sales unexpectedly recorded the biggest decline since September 2009 in the Christmas season in December last year, some analysts believe that the US economy has slowed down. Retail performance has fluctuated significantly since 2019, with growth in January and March, and a reversal in February and April. Based on US stock market volatility and cold weather, the US Retail Federation expects a strong rebound in retail sales in May.


The market is also closely monitoring the impact of the White House's policy of tariffs on Chinese imports on the retail industry. Macy's Inc. Mace's Inc. and Kohl's Corp.'s executives at Coles Stores said that the current outlook does not reflect the potential impact of tariffs, the fourth round of $300 billion impact on these retailers, which are dominated by apparel accessories sales. The tariff adjustment of Chinese-made products has not yet been implemented.


Nordstrom Inc. Nordstrom's net profit for the first quarter fell 57.5% to $37 million from $87 million in the same period last year. EPS also fell from $0.51 to $0.23, far below market expectations of $0.43.


Management lowered its full-year net sales growth forecast from the previous 1%-2% to -2% to zero, and the EPS outlook was lowered from 3.65-3.90 USD to 3.25-3.65 USD. Kohl’s Corp. Coles Stores also lowered its full-year profit guidance.


During the first quarter, the group continued to increase sales promotion to clear out-of-season inventory and reduce the cost of occupation. Inventory as of May 4 decreased by 5.3% to US$2.006 billion compared with the same period of last year, but the gross profit margin contracted by 60 basis points to 33.5%. .


In October of this year, Nordstrom Inc. Nordstrom's women's clothing store will debut in Manhattan, New York, and join the ranks of Neiman Marcus Nieman Marcus, the luxury department store that opened in Hudson Yards in New York this year. Hudson's Bay Co. (TSE:HBC) Hudson Bay Group, Macy's Inc. Macy's and Neiman Marcus Group LTD LLC Nieman Marcus's New York-based veteran luxury department stores Saks Fitfh Avenue, Bloomingdale's and Bergdorf Goodman.


In the early part of Wednesday, Nordstrom Inc. (NYSE: JWN) fell by a maximum of 10.8% to $33.75, the lowest since August 2010.