Retail

Nordstrom plunges after taking $72 million charge for customer credit card refunds

Key Points
  • Nordstrom reported earnings that fell short of expectations.
  • The department store chain said it took a one-time charge of $72 million to refund customers who were incorrectly charged higher interest rates on its store credit card.
  • The company reported that stores open more than a year saw sales grow 2.3 percent overall, slightly above what Wall Street had projected.
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Nordstrom credit card error costs company $72 million

Nordstrom shares plunged after the company said Thursday it incorrectly overcharged some of its credit card customers and missed its original third-quarter earnings projections.

Nordstrom wrote down $72 million in credit card refunds to customers who were incorrectly charged higher interest rates. The one-time charge drove its net income down 42 percent to $67 million, or 39 cents a share, during the three months ended Nov. 3, compared with $114 million, or 67 cents a share, the year before.

Co-president Blake Nordstrom said the company has taken steps to ensure it doesn't overcharge customers in the future. A change in some of its internal settings in 2010 caused it to erroneously charge higher interest rates on store credit cards that were delinquent, executives said.

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Technician reacts to Nordstrom earnings and the retail space

"We sincerely apologize to these cardholders. We realize customers and shareholders place a great deal of trust in us, and that's a responsibility we take seriously," Nordstrom said on a conference call with analysts.

Without the charge, which knocked 28 cents a share off its earnings, Nordstrom would have beat Wall Street forecasts by a penny. Analysts originally expected Nordstrom to earn 66 cents a share.

The department store chain, which reported its earnings after the markets closed Thursday, said it estimates that less than 4 percent of its cardholders would be receiving a refund, with most receiving less than $100.

Shares of Nordstrom fell more than 11 percent in aftermarket trading.

Revenue rose 3 percent to $3.75 billion from a year ago, above expectations for $3.69 billion in sales.

Sales at stores open for at least a year were up 2.3 percent overall, above Wall Street expectations for an increase of 2.2 percent.

Shares of Nordstrom have surged 51 percent over the past 12 months, hitting a fresh 52-week intraday high of $67.75 on Nov. 6.