Nordstrom, the upscale US department store chain, cheered investors with a stronger than expected quarterly profit, despite a 5 per cent decline in sales, adding to fresh optimism over the health of the retail industry.

The upbeat results came on the heels of blockbuster earnings from industry heavyweights Target and Lowe’s, whose robust sales growth in the second quarter allayed broader fears of a slowdown in the economy and drove shares across the sector sharply higher.

Nordstrom was up nearly 6 per cent during the trading day, and following the publication of its results after the bell the stock jumped as much as 16 per cent more.

Net sales fell to $3.78bn from $3.98bn in the second quarter that ended August 3, missing a consensus estimate of $3.93bn.

But the Seattle-based company managed to boost profits by keeping inventory in check and reducing expenses. Inventory was down 6.5 per cent compared to the second quarter last year.

Nordstrom co-president Erik Nordstrom said Wednesday it was “confident in our ability to manage through cycles” and focused on lifting top-line sales, amid softer results across the retail group’s full-price and discount stores.

Shares in Nordstrom settled at around 10 per cent higher in after-hours trading, while the new round of good news added more fuel to some other retailers’. Macy’s was up 1.2 per cent and JCPenney was up 3 per cent after hours, for example.

Nordstrom booked $141m in net earnings, or 90 cents a share, down from $162m, or 95 cents a share, in the year-ago period. The company easily eclipsed analysts’ average forecast for earnings per share of 75 cents, according to a Refinitiv poll.

Nordstrom attributed its sales decline in the quarter to softer performances for its annual Anniversary Sale in July and its off-price business, noting it experienced a challenging start to the period.

In full-price retail, Nordstrom’s net sales declined 6.5 per cent. Off-price sales, which include its Nordstrom Rack stores, were down 1.9 per cent.

Nordstrom narrowed its full-year guidance for sales and earnings. Net sales are seen falling approximately 2 per cent, versus a prior view of down 2 per cent to flat. Earnings are expected to come in between $3.25 and $3.50 a share, compared with a range of $3.25 to $3.65. Analysts were looking for fiscal 2019 earnings of $3.27 a share.

The company said it is still evaluating the fourth tranche of proposed tariffs from the Trump administration, but added the impact of the potential levies on Chinese goods is expected to be “relatively immaterial for the year”.

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