Executive Summary

• Nordstrom announced 1Q16 diluted EPS of $0.26, far below the consensus estimate of $0.45. The disappointing results were driven by sales that were lower than planned and by higher markdowns intended to better align inventory positions with softening industry trends.
• Total revenues were $3.19 billion, slightly higher than in the same period a year ago but below consensus of $3.28 billion. Comps declined by 1.7%, versus consensus of a 0.2% increase. Management revised its FY16 same-store-sales growth forecast from 0%–2% to (1)%–1%. The company also lowered its EPS guidance, from $3.10–$3.35 to $2.50–$2.70.
• Lower retail EBIT compared with the year-ago quarter reflected increased markdowns and higher credit chargeback expenses in addition to planned fulfillment and technology costs supporting the company’s growth initiatives.