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Nordstrom stock slides, Express posts surprise profit, Urban Outfitters inventory issues

Myles Udland, Brian Sozzi, and Julie Hyman break down Wednesday's latest retail earnings, which include: Nordstrom experiencing a dip in its stock even after reporting a better-than-expected quarter due to concerns over the supply chain and lagging overall sales, Dick's Sporting Goods boosting returns to shareholders after posting an earnings beat, Urban Outfitters concerns over inventory as trade disruptions continue to impact supply, and Express topping estimates as the company swings to a surprise profit.

Video Transcript


JULIE HYMAN: This is "Yahoo Finance Live." We've got a handful of retail earnings still coming out after the close yesterday and this morning. Let us start with Dick's Sporting Goods, shall we? That company coming out with numbers that beat estimates. Comp sales forecast for 2022, an 18% to 20% gain. And as I was looking here, it looks like the company, we like to talk about how the numbers compared with 2019, and it looks like Dick's has been coming in above those 2019 levels. You see their comps up 19% during the second quarter. Brian, what stands out to you about these Dick's numbers?

BRIAN SOZZI: Everything. This is a home run quarter from Dick's Sporting Goods. This is along the lines that we saw out of Best Buy. Just a company that is firing, we saw from Best Buy yesterday, a company that is really firing on all cylinders, execution very good by management. And two favorable consumer tailwinds. The earnings call is going to kick off soon.

I suspect that executives will get on this call and discuss how the golf business is strong, sneaker business is strong, sporting goods remain strong, especially as kids go back to school and start playing various sports. They've also invested large sums of money to improve the look and feel and the service inside of their golf business, a big driver, outdoor sports, a big driver for this company.

And also too, part of the reason why we're seeing this stock up double digits premarket is this special dividend. And this is what I hinted at yesterday with Best Buy, a company sitting on billions of dollars in cash, and they're going to have to do something with it. And Dick's is. $5.50 per share special dividend. Also hiking up its buyback by $200 million, plus the strength of the quarter. Sales up 45% versus 2019. Ticked all the boxes. Likely, I would not be shocked to see follow-through on this bullish move here in coming sessions. Even--


BRIAN SOZZI: Even the outlook, Myles. I mean, look at the street. They took their earnings guidance for the full year to $12.45 to $12.95. Consensus, $9.01. If you're an analyst on Dick's Sporting Goods, where the hell have you been? Model the company correctly, because you've been completely off.

MYLES UDLAND: Yeah, I mean, when you look at the stock over the last five years, you saw a company that was languishing as let's call it an appendage of the death of the mall. Some Dick's are attached to malls, some that are are free-standing. But this stock was at $20 bucks at the low. Now it's set to open at $130. And as you mentioned, and it's upside down, and as you mentioned there, Sozzi, I'll be reading the call looking for commentary on the Golf Galaxy business.

But really, every trend that came out of COVID related to recreation outdoors, they have field and stream stores, golfing, camping, biking, getting yetis, it all sort of broke in Dick's' favor, and now they're rewarding shareholders here. With this shareholder return. But also a business that has--


--Fundamentally, has not been in this kind of position before.

JULIE HYMAN: There's that opening bell. SmartRent, which is coming public through a SPAC, is ringing the bell this morning. Meanwhile, even our graphics bowled over by those Dick's numbers. Sorry, guys. Let's move it on to Nordstrom here this morning. And this is one that on the face of it, you get these earnings sometimes where on the face of it, things look good. The company beat estimates, Nordstrom did. You could see they're handily beating estimates on the earnings line. And yet, the stock is not behaving like there was a beat here.

And looking through some of the analyst commentary this morning, it looks like the expectations were perhaps a little bit high going into this. They're looking at Nordstrom versus peers in this environment. And they're also looking at the company's margin forecasts. So perhaps that is one of the things that is responsible for the drop in the shares that we have been seeing in the premarket and in the post market as well, after the company reported its numbers, Soz.

BRIAN SOZZI: Yeah, a couple red flags here, and I think why you are seeing shares in the penalty box, now down double digits. First off, sales down 6% versus 2019, second quarter of 2019. Not necessarily a great thing to see. Gross profit margins flat versus the second quarter of 2019. Also, their anniversary sale. This is a very important event for this company each year. Those sales are only 1%. And then if you take a step back, Julie, and you mentioned some of the analysts' reaction this morning here, really highlighting how Nordstrom may be underperforming some others in the department stores space.

Deutsche Bank analyst, Gabrielle Carbone noting operating income for Nordstrom was down 30% in the second quarter on a two-year basis. Macy's saw operating income up 295%. Kohl's up 49%. And also too, highlighting some weakness on a two-year basis in the Rack business. Rack sales down 8% versus 2019. Ross store sales up 21%. Mar Maxx, that is a combination of Marshalls and TJ Maxx, owned by TJX Companies, those sales are up 20%. So I think that's why you're seeing the stock trade off really aggressively in the early going.

MYLES UDLAND: I mean, I think when you're coming out and saying that sales are still down against 2019 in this environment, Brian Sozzi, as you mentioned, not going to be positively received. Also talking about inventory levels higher. Not great. When inventories are up, that sales trajectory is down. And the beginning of the press release starts with a timing shift around the anniversary sale essentially as the excuse for why you're coming in light here on the numbers. Not something obviously, as you can see the reaction, investors are excited about.

JULIE HYMAN: Yeah, I feel like they always bring up that anniversary sale in all of their releases. That's always kind of the issue for Nordstrom when things don't go their way.

MYLES UDLAND: Every quarter, their once annual anniversary sale comes up somehow.

JULIE HYMAN: It feels that way.

MYLES UDLAND: Although I think it's twice. It happens twice a year, right? Is it once a year? I don't know, Sozzi.

BRIAN SOZZI: Once a year. I believe it's once a year.

JULIE HYMAN: Yeah, I think it's once a year also. But on the inventory front, one of the most interesting reports to me, and this is something that Sozzi flagged, came this morning the form of Urban Outfitters. Not so much because Urban Outfitters did well, which it did, but because of some comments that the company's CEO Richard Hayne made. He said, our biggest concern right now is actually getting the inventory, not when it's going to come in or how much it's going to cost.

He talked about Vietnam as really one of the sources of bottlenecks here. He says we're doing whatever we can to get it in whenever we can, which is pretty interesting here, Brian Sozzi, because we've been looking to China and the port shutdown there, which has just been lifted, by the way. And Vietnam kind of snuck in under our noses as an issue for some of these retailers that had shifted their manufacturing there, right?

BRIAN SOZZI: Julie, you weren't supposed to say anything about this. I have to go write the story up after the show. Now I'm going to have to hop off the show and write the story up before somebody else beats me to it. But, no, yes, to your point, we're taught, we're hearing from a lot of apparel folks, Vietnam is a very key area to source apparel from. And essentially, Vietnam is on lockdown because of the COVID-19, an outbreak, a new outbreak over there. So you just can't get your goods.

But I am surprised. I will say this. I am surprised to see Urban shares down as much as it is. This was a very, very strong quarter. And comments on the conference call from Richard Hayne, the founder and CEO of the company, suggesting that sales momentum for Free People, Anthropologie, very strong double digit gains continued into August. That is a very good thing to see.

Also, really noting that they are really no longer promoting anything at Urban Outfitters. They are raising prices in Urban Outfitters. So if you like this brand, go out and buy 20 pairs of jeans at Urban Outfitters today, because the prices are going to be higher over the next few months, as they try to improve profit margins in that brand. If anything, I think it is why you're seeing the stock down here, one, is what you mentioned on Vietnam. And then two, they did note, Hayne did mention that sales growth has slowed a little bit in August at the Urban brand because it's hiking up prices. So something to watch moving forward.

JULIE HYMAN: Yeah, I guess you can buy those 20 pair of jeans if you can find them, right, given some of the inventory issues. So maybe, I don't know, maybe that's part of the.

MYLES UDLAND: Who needs 20 pairs of jeans?

JULIE HYMAN: I don't know. Someone in Sozzi's head needs 20 pairs of jeans.

MYLES UDLAND: A whole basketball team gets jeans?

BRIAN SOZZI: There's never enough jeans, Myles, come on, come on. I love jeans, I love jeans. I think I have like 10 pairs.

JULIE HYMAN: We're not going anywhere again, so we don't need jeans.

MYLES UDLAND: That's right.

JULIE HYMAN: All right, let's turn finally quickly to Express, which has the double benefit this morning I suppose, of reporting numbers, and also being a meme stock, right? Although the stock is trading lower right now, but it was trending, it was trending ticker is why I'm saying that. I noticed it on that list we were talking about this morning. But the numbers, the numbers were better than estimated here, right, Soz?

BRIAN SOZZI: Yes, some street cred definitely going the way of Express CEO Tim Baxter, new CEO. We talked to him a month ago for our meme stock special. Told us that sales started off strong in the quarter. And this seems to have continued. You go on the Express website, you're getting the sense that he is, in fact, Tim Baxter, turning this company around, bringing the cool back to Express. It looks like they have started running their new TV campaign, TV commercial campaign. I am almost tempted to go back into an Express for the first time in 10 years and actually buy something. So that is very encouraging. I'm not sure if I'm their target demo anymore, but still, I have historically liked Express.

But on the numbers, really the August sales look to have started strong for the company. Another company like Urban saying August is going pretty well so far. No impact from the Delta. So it seems e-commerce pretty well. Gross margins up 580 basis points versus 2019. So you're starting to get the sense there is a turnaround happening on Express. And Tim Baxter will be on with us Friday morning, we'll ask him all about it.

JULIE HYMAN: Looking forward to that. We'll see if the shares manage to recover a bit before then. Thanks, Soz.