What Happened:

Shares of luxury department store chain Nordstrom (NYSE:JWN) fell 7.5% in the morning session after Macy's, a key competitor, reported disappointing second-quarter earnings, with revenue coming in below Wall Street's expectations. In addition, both earnings per share (EPS) and EBITDA missed analysts' estimates by a wide margin due to inventory shrinkage. This shrinkage (caused by clerical error, goods being damaged, lost, or stolen) led to a decline in profits. Macy's also lowered full-year EPS guidance, which came in below consensus estimates. Given the similar retail landscape that both Macy's and Nordstrom inhabit within the department store segment, the weak earnings could be a harbinger of broader challenges on the horizon.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Nordstrom? Access our full analysis report here, it's free.

What is the market telling us:

Nordstrom's shares are very volatile and over the last year have had 31 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.

Nordstrom is up 8.39% since the beginning of the year, but at $17.11 per share it is still trading 35.2% below its 52-week high of $26.38 from February 2023. Investors who bought $1,000 worth of Nordstrom's shares 5 years ago would now be looking at an investment worth $282.01.

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