Upscale Nordstrom edged past quarterly views late Tuesday, but slashed full-year guidance as it deals with excess inventory. JWN stock plunged overnight.
Early Tuesday, Macy's surprised analysts with smaller-than-expected earnings and sales declines. Macy's stock closed modestly higher.
The department store industry group includes Macy's, Nordstrom, Dillard's and Kohl's. The group advanced more than 27% in the past month, the biggest move among the 197 industry groups tracked by IBD. But retail stocks have generally reported mixed results over the past week as inflation pressures cut into consumer spending.
Walmart beat estimates last week. And Target missed earnings but hit revenue predictions. Both big-box giants reaffirmed guidance for the rest of the year. Discount retailer TJX missed on revenue, while Kohl's and Ross Stores cut their outlooks on Thursday.
Major funds are cautious about the impact of inflation on consumer spending. David Tepper's Appaloosa Management hedge fund exited its position in Nordstrom and reduced its holdings in Macy's by 24% in the second quarter, according to an Aug. 15 SEC filing.
Macy's Earnings
Expectations: Consensus views saw Macy's earnings for the quarter falling 33% to 86 cents per share. Analysts projected a 2.9% sales slump, to $5.49 billion, down from $5.65 billion in 2021.
Results: Macy's earnings per share fell 22% to $1. Revenue edged down to $5.6 billion.
Overall, same store sales were down 1.5% over the year while Macy's brand comparable sales were down 2.9%. Increases in comparable sales for Bloomingdale's and Bluemercury partially offset the decrease.
Inventory climbed 7% year-over-year. And Macy's noted its sell-through rate decreased since Father's Day, driven by industry-wide excess inventory and slowing discretionary spending by consumers.
Outlook: Macy's cut its full-year EPS target $4-$4.20 with revenue of $24.34 billion to $24.58 billion. It had forecast adjusted EPS of $4.53-$4.95 on sales of $24.46 billion to $24.7 billion.
The department store giant cited risks from deteriorating discretionary spending, inventory levels within the industry and risks from a more pronounced macro downturn.
On Monday , Deutsche Bank lowered its price target for Macy's stock to 25 from 29 with a hold rating. Analyst Gabriella Carbone thought apparel retail management teams will take a "prudent" approach to the second half of the year.
Macy's stock: Shares rose 3.8% to 19.31 on Tuesday Macy's stock is nearly 50% below its 52-week high in mid-November.
Nordstrom Earnings
Expectations: Analysts saw Nordstrom earnings per share climbing 63% to 80 cents. Revenue was anticipated to grow 7.8% to $3.96 billion.
Results: Nordstrom reported adjusted earnings of 81 cents per share and revenue jumped to $3.99 billion for the period.
Inventories rose 4.8% over the year to $2.39 billion for the period. Nordstrom's customer traffic and demand "decelerated significantly" at the beginning of June, predominantly for its Nordstrom Rack off-price department stores, the company said.
"We are adjusting our plans and taking action to navigate this dynamic in the short term, including aligning inventory and expenses to recent trends," CEO Erik Nordstrom wrote in the announcement.
Nordstrom slashed its full-year outlook as result It low sees adjusted EPS of $2.30-$2.60, vs. its previous target of $3.20 -$3.50 from the first quarter. It also cut its adjusted EBIT margin for the year to 4.5%-4.9%, from 5.8%-6.2%.
For the second half of 2022, the Nordstrom says it will focus on "aggressively right-sizing" its inventory and invest in its supply chain and merchandising capabilities.
JWN stock rose 1% Tuesday, but plummeted 14% after hours. Nordstrom stock is trading well below its 52-week high of 37.81 from last August.
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