Nordstrom Shares Tumble After Credit Card Glitch, but Full Year Guidance Outlook Still Good

Shares of Nordstrom Inc plummeted as much as 16 percent in early trading on Friday after the release of their recent quarterly report. Unfortunately for the upscale retailer, the numbers are less than exciting, resulting in the company’s biggest intraday decline in nearly three years. Analysts have mostly been focused on weaker-than-expected gross margins and full-price comparable store sales, and also a credit card issue which resulted in a one-time charge.

This “one-time charge” refers to erroneous charges to delinquent credit card accounts at a rate that was far too high than it should have been. This odd anomaly resulted in the Seattle-based retailer registering a single $72 million bump to EBITA (earnings before interest and taxes). That equates to an impressive bump of 28 cents per share in the third quarter, which put third-quarter profit at around $67 million, or 39 cents per share.

Nordstrom’s Chief Financial Officer Anne Bramman remarks the company is now looking at how each individual credit card account charge will impact their bottom line. Furthermore, they are preparing to issue refunds or credits to those cardholders who may have been affected.  Fortunately for the company, only about 4 percent of accounts will receive these refunds, which are mostly in the range of $100 (or less).

This glitch comes not too long after the company’s disclosure, last week, in regards to a security breach that broadly exposed employee information—both current and former—including things like names, salary data, even Social Security numbers.

Looking at their financial statement, then, Nordstrom sales in stores open for at least one year increased by 2.3 percent in the quarter ending in October.  However, they also note that “full-price” sales are only up 0.4 percent from the same period last year.  They estimate full-year guidance earnings should be in the range of $3.55 to $3.65 per share. Of course, Nordstrom also expects to see sales rise by about 2 percent over last year during the final quarter (the Christmas season, which is always the biggest profit sector in retail); they expect full year revenues to net around $15.6 billion.