UPDATE 3-Nordstrom profit below Street view, shares fall

Thu Nov 12, 2009 6:53pm EST

* Q3 EPS 38 cents misses Wall Street view by a penny

* Q3 revenue up 3.5 pct to $1.87 bln, beats Street view

* Raises outlook, sees fiscal 2009 EPS $1.83 to $1.88

* Shares down 5 percent (Adds detail on debt reserve, capex, update shares, byline)

By Alexandria Sage and Phil Wahba

SAN FRANCISCO/NEW YORK, Nov 12 (Reuters) - Nordstrom Inc (JWN.N) forecast a drop in full-year same-store sales and posted a quarterly profit slightly below Wall Street expectations, raising doubts about its holiday-season performance and sending its shares down more than 4 percent.

The upscale retailer raised its full-year earnings forecast, but analysts questioned whether it could meet the earnings numbers after it said it expects same-store sales to be down 6 to 7 percent for its fiscal 2009.

Nordstrom's mid-priced rivals Macy's Inc (M.N) and Kohl's (KSS.N) have tried to dial down investor expectations about their holiday sales this week, forecasting earnings at the low end of Wall Street estimates. [ID:nN11421601] [ID:nN12403080]

"The shares' drop is a function of missing the estimates and a lack of confidence they can meet guidance for the holiday quarter," said Brian Sozzi, an analyst with Wall Street Strategies.

The unpredictable economy and questions surrounding where unemployment is headed have made company forecasts less reliable, Sozzi said.

Nordstrom expects earnings between $1.83 to $1.88 for the 2009 fiscal year ending on Jan. 30, an increase from an earlier view of $1.50 to $1.65.

Toon van Beeck, senior industry analyst at IBISWorld, said the overall results were positive, but called the same-store sales decline expected for the full year "quite steep."

"There really is a lot of uncertainty left in the market. There's no harm in underestimating ... and then overshooting when the time comes," van Beeck said.

Nordstrom posted a net profit of $83 million, or 38 cents per share in the third quarter ended Oct. 31, up from $71 million, or 33 cents per share, a year earlier. Revenue rose 3.5 percent to $1.87 billion.

Analysts, on average, had been expecting a profit of 39 cents per share and sales of $1.78 billion during the quarter, according to Thomson Reuters I/B/E/S.

IMPROVING TREND?

Nordstrom said its best-performing categories at Nordstrom stores and online were jewelry, finer apparel for women and shoes.

"Although there is continued uncertainty around consumer spending, the company experienced an improving trend in same-store sales in each month of the quarter while effectively managing inventory and expenses," the company said in a statement.

Gross profit rose by 90 basis points in the quarter, helped in part by controlled inventory levels, which fell per square foot by 10.7 percent from the year-ago period.

Nordstrom said it raised its bad debt reserve for credit card delinquencies by $6 million based on current credit trends.

Capital expenditures will be approximately $325 million to $375 million in fiscal 2010, above the approximately $280 million in fiscal 2009.

Shares fell to $32.74 in extended trading after closing at $34.51 on the New York Stock Exchange. (Reporting by Alexandria Sage and Phil Wahba; Editing by Andre Grenon, Gary Hill, Phil Berlowitz)

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