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What Nordstrom Earnings Mean for the Second Half of 2009

Nordstrom came in in-line with expectations, but guidance is slightly more positive.

The annual Anniversary sale did well, as has been widely speculated.

More importantly, they are guiding higher for the full year, to $1.50-$1.65 vs. prior guidance of $1.25-$1.50.

What does this mean for second half of the year earnings? In the first half they earned $0.79. That would imply earnings of $0.71-$0.86 in the second half, with current consensus at about $0.67.

Two things are important:

1) They raised same store sales guidance for the year, to a decrease of 9 to 12 percent; prior guidance was a decrease of 10 to 15 percent. So there is an implication that sales trends will be slightly better in Q3 and Q4, implying slightly higher profitability.

2) Gross profit trends are also improving.

Stock is trading down slightly, as traders understandably sell on the news after a 30 percent runup in the last month.

Traders are noticing a very successful trade: Buy the retail stocks after earnings as they dip, then sell them as they move up tomorrow. How long can that trade work, given the runup in retailers? Until it doesn't work anymore!

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