If there were any questions if the US consumer was merely "strong" or "quite strong", after the abysmal results from Macy's first, and moments ago, Nordstrom, they should all be safely swept away now.
Any time a company starts its press release with a blatant mea culpa... run. Like in the case of Nordstrom: "The Company's third quarter performance was below Company expectations, reflecting softer sales trends that were generally consistent across channels and merchandise categories."
What happened was ugly: the company reported revenue of $3.24 billion, a miss to the $3.38 billion expected, and EPS of $0.42, nearly 50% below the expected $72. Q3 EBIT likewise crashed from $262 million to $151 Y/Y, as comp store sales of 0.9% were massively below the 3.6% expected.
Amusingly the retailers are unable to keep their lies straight - on one hand you have Macy's blame the warm weather for plunging sales, and here you have JWN saying costs were among its best sellers: "Nordstrom comparable sales, which consist of full-line stores and Nordstrom.com, increased 0.3 percent. The top-performing merchandise category was Cosmetics. In addition, coats, younger customer-focused departments and dresses continued to reflect strength in Women's Apparel."
Considering we already mocked the "it's the weather" bullshit, there is little we can add.
Where things get really bad though, is when looking at the acceleration in markdowns and the surge in inventory:
Gross profit of $1.1 billion, or 33.9 percent of net sales, decreased 163 basis points compared with the same period in fiscal 2014, primarily due to higher markdowns in addition to the planned impact of higher occupancy costs related to store growth and the increased mix of Nordstrom Rack. Ending inventory increase of 8.0 percent...
But wait, there's more because just before the abysmal earnings report the Company paid a special cash dividend of $900 million, or $4.85 per share of outstanding common stock on October 27. Better to do that when the stock is higher rather then lower, eh?
It gets better: "the Company expects to initiate share repurchase for the remaining net proceeds beginning in the fourth quarter.... . For fiscal 2016, the Company estimates the net financial impact, including the share repurchase impact, to be approximately neutral to earnings per diluted share."
And the punchline:
On October 1, 2015, Nordstrom's board of directors authorized an additional $1.0 billion share repurchase program. During the third quarter, the Company repurchased 3.5 million shares of its common stock for $250 million. A total of $1,486 million remains available under its existing share repurchase board authorizations. The actual number, price, manner and timing of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission
And to think it could have waited just a few weeks and gotten 15% more for its money consiering the absolutely collapse in JWN stock after hours.
... but no, its management team had to go ahead and buyback half a billion of its shares in 2015 at an average price of $72, a -26% return that is even worse than that of Bill Ackman.
Finally, and not unexpectedly, JWN slashed its outlook across the board confirming just how "strong" the US economy really is.
Three weeks ago we asked a simple question.
We now have the answer.