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Nordstrom stock tumbles after weak earnings, warnings of supply chain shortages

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Yahoo Finance Live's Brian Sozzi and Julie Hyman break down how Nordstrom stock is dropping after falling short on earnings amid supply chain issues.

Video Transcript

JULIE HYMAN: Let's maybe move to Nordstrom. I'm kind of scared to talk about Nordstrom also this morning, [? Soz. ?] Nordstrom is too. That company had problems managing, in particular, inventory its rack store.

Sales at the Rack are still 8 below where they were pre-pandemic, really big miss when it comes to earnings per share in particular for Nordstrom, $0.39 versus the $0.55 estimate. And here too, it has to do with poor inventory planning. At the Rack, in particular, they're not able-- they haven't been able to get in some of the higher end items that drive this sort of treasure hunt appeal of a place like Rack, and so that kept people away.

BRIAN SOZZI: Julie, can you confirm I'm not sweating through my shirt here. Can I go get a drink, because really, no, this is not-- this is also not a good quarter for Nordstrom. Now, the difference here is that, if you follow the Nordstrom story for the past year, this is somewhat expected. Now, Nordstrom has been struggling getting the inventory they need in the stores.

I think the commentary last night on the earnings call was a little more worrisome than investors had come to expect. Particularly notably, as you mentioned, Julie, on the Rack. It looks like they have a lot of work to do in trying to reposition price points at Nordstrom Rack stores, get better inventory flow into the stores. They acknowledge they have a lot of work to do to turn that business around, but again, I think for them, it's a disappointing quarter. They would be the first to admit it, and now questions exist on how are they going to recover from a quarter like this, and ultimately, what can they put up in terms of profits for 2022?

JULIE HYMAN: And you know, to be clear here, these companies are not alone in experiencing these supply chain pressures. Right? I mean, you know, the favorite detail I don't think we've talked about yet from Gap's report for me is, you know, while all these other companies, or some of them, are chartering their own ships to try to get their stuff into port-- which doesn't necessarily help, because there's no room for them to come into the port, whether they have their own ship or not. Gap says, oh, no, we're going to take it up a notch both in cost and in-- I don't know-- taking it to more extreme measures, and they rented some planes. Right? And that was a big cost for them in the quarter too.

BRIAN SOZZI: Well, I'm glad you mentioned that, Julie, because let's get a quick sound [? bite ?] here from a CEO that has been around for a long time, gets it, and is not out there putting out foolish guidance. That is Foot Locker CEO Richard Johnson, who I talked to last night, while I was freezing my tail off in New York City. I asked him about supply chain bottlenecks, and when they might clear up. Here's what he said.

RICHARD JOHNSON: Well, we've been battling the supply chain challenges for almost a year now. Obviously, the shutdown in Vietnam and the slowdown in the ports, that's been exaggerated a little bit, exacerbated a little bit as we got closer to the holiday, puts a lot of pressure on the team to react and find other opportunities. But our consumer is very clearly, you know, out to shop. If they don't find their preferred style, color, size, they really are going to the next available, and that's one of the real benefits that we've got being a multi-branded retailer.

BRIAN SOZZI: And there's our guy, Richard Johnson here. He's been on numerous times. I have talked him for many, many years here. He's not out there putting out absurd guidance, like the folks over at Gap. He gets it.

He is telling you that he's going to have to endure supply chain bottlenecks for some time, does see things easing a little bit next year here. But again Foot Locker has a good story, and I think you're just seeing a better management team at that company compared to what we're seeing at the likes of Gap. Very fired up about Gap, very disappointing quarter.

I hate that people are going to lose a lot of money. You have a lot of folks right now that have just bought into this turnaround story, and now they're going to have it really handed to them today before Thanksgiving. And it really fires me up, and frankly, it just upsets me.

JULIE HYMAN: I hadn't noticed. All right. We're going to move on.