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.
Nordstrom credit card error costs company $72 million
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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.

Technician reacts to Nordstrom earnings and the retail space
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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.