Nordstrom shares plunged Friday morning after the department store chain reported disappointing quarterly earnings Thursday evening that showed slowing growth in foot traffic at its namesake stores.
The stock was last down more than 12 percent in morning trading on the news, putting it on track for ts work week since 2008 and its worst day since May 2016, when shares dropped 13.4 percent.
Sales at Nordstrom's full-price stores open for at least 12 months climbed 0.5 percent, far below the 5.8 percent growth at Nordstrom Rack, its discount chain that competes with TJ Maxx and Ross Stores, and missing Street expectations.
The company's earnings missed analysts' original expectations, attributed to a $72 million charge during the quarter that wiped out 28 cents a share. It stemmed from refunds to customers who were erroneously charged higher interest rates on its store credit cards.
"The announcement begs the question as to whether or not prior-period credit income levels were inflated, Nomura analysts led by Simeon A. Siegel said in a research note.
The results looked especially poor as retailers like Macy's and Walmart reported quarterly earnings this week that topped analysts' expectations, benefiting from a strong economic backdrop and high consumer confidence heading into the holidays.
Nordstrom management during a call with analysts attributed the weakness at its full-price stores to "planned" returns of purchases from its anniversary sale that happened during the second quarter. Now, the company will have to show during the key holiday quarter this was a one-off event.
Cowen & Co. analyst Oliver Chen said he was looking for more "comparable store sales consistency" during the third quarter. Looking ahead, Nordstrom should benefit, he said, "from a less messy calendar next year," and the stock could bounce back if same-store sales growth improves.
In addition to this, analysts are watching Nordstrom's inventory closely, as some are concerned it's starting to build. This becomes burdensome for retailers as they're then forced to use steep discounting to get rid of excess merchandise in stores.
"After several quarters of expressing our fear that inventory levels across the department store channel were not as healthy as they seemed amid a growing diversion of excess product to off-price channels, third-quarter reports are making the inventory situation harder to ignore," Nomura's Siegel said in a research note.
Nordstrom said its inventory increased by 7 percent during the third quarter from a year ago.
The department store chain will have less pricing power moving forward, Siegel said, if it has to work harder to get rid of extra inventory.
Nordstrom shares are up about 7 percent for the year.
— CNBC's Gina Francolla contributed to this report.