The Seattle-based retailer erroneously charged delinquent credit-card accounts a too-high interest rate, resulting in a $72 million hit to earnings – 28 cents per share – before interest and taxes.
Nordstrom’s quarterly profit — and its stock price — were walloped by the disclosure that it has been charging some credit-card customers too much interest since 2010.
Executives said Thursday the years-long error, in which delinquent card accounts were overcharged, was recently discovered and is being corrected, resulting in a $72 million hit to Nordstrom’s third-quarter earnings.
Chief Financial Officer Anne Bramman said the company is assessing the impact to each individual credit-card account and is preparing to issue refunds or credits. Fewer than 4 percent of accounts will receive refunds, typically of $100 or less, she said.
“We do not like having this happen with our customers and we are very sorry that it took place,” she said.
The refunds are part of the one-time, nonrecurring charge, which shaved off 28 cents per share of profit.
As a result, profit for the quarter was $67 million, or 39 cents a share. If not for the charge, the company’s profit would have been just above the consensus estimate of Wall Street analysts of 66 cents a share.
Most Read Business Stories
- Seattle construction still booming and won't end anytime soon
- Forget Marie Kondo: There's a better, high-tech method to tidying up
- Seafood giant to spend up to $23 million to fix pollution
- Socialism is gaining in popularity, and today's capitalism is to blame | Jon Talton
- REI CEO Jerry Stritzke resigns, saying he failed to disclose a 'personal' relationship
The credit-card glitch follows the disclosure last week that a security breach exposed a wide range of current and former employees’ information, including names, Social Security numbers and salary data. Nordstrom executives made no mention of that issue during a conference call with financial analysts after its earnings announcement.
Nordstrom stock, which was down about 3.5 percent Thursday, plunged nearly 9 percent more in after-hours trading to about $53.65 as of 7:16 p.m. EST.
Total revenue in the fiscal third quarter was nearly $3.75 billion – including $100 million in credit-card revenue — up about 3.3 percent from the year-earlier quarter.
Those sales figures were also muddied by a shift in the timing of one of the company’s biggest sales events – the Anniversary Sale fell in the second quarter this year and the third quarter last year – and a new revenue-recognition standard. The company said looking at the second and third quarters together removes those complications, and that sales for the six-month period were up 5.1 percent against the comparable six months in 2017.
Comparable sales – a closely watched retail measure of business at existing locations – increased 2.3 percent in Nordstrom’s 13-week fiscal third quarter, ended Nov. 3, against the comparable period in 2017. Within that, however, comparable sales through Nordstrom’s full-price channels were up 0.4 percent, while its off-price business, including Nordstrom Rack, grew 5.8 percent.
Digital sales remain the fastest-growing part of Nordstrom’s business – up 20 percent on the quarter and now equal to 30 percent of the company’s total sales through the third quarter. Digital was less than a quarter of the company’s revenue two years ago.