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  • Earnings
  • disruptive innovation

Will recovering sales lift the Nordstrom stock post-earnings?

The Nordstrom [JWN] stock has declined by more than 7% over the past three months (through 20 August), as the owner of the luxury department store chain continues to recover from the impact of COVID-19. 

As a benchmark, the S&P 500 is up 6.9% over the same timeframe, while the iShares Core S&P Mid-Cap ETF [IJH] – which holds 2.94 million shares in Nordstrom, according to ETF.com – is trading flat in the same period.

 

 

Some choppy trading seen over the spring and summer reversed the gains seen earlier in the year, with the luxury department store chain stock at one point hitting $46.45 in intraday trading on 15 March. On 20 August, the Nordstrom stock closed at $35.11, and while that was up by more than 3% on the day, the stock is down 24% from its March high.

Giving investors hope that the Nordstrom stock can recover is strong second-quarter numbers from rival Macy’s, with the stock up by more than 7% following Macy’s earnings announcement on 19 August. Should Nordstrom deliver something similar, then its stock could continue to head in the right direction.

 

Why should investors care about Nordstrom stock?

Nordstrom’s first quarter numbers followed impressive earning updates from rivals meaning expectations were heightened. Sadly, this wasn’t to be, with a mixed set of results missing Wall Street forecasts.

In the first quarter, Nordstrom lost $1.05 a share, compared to the $3.33 loss a share seen in the same period the year before. Revenue came in at $3.01bn, up 44% from the previous year. 

The big growth driver has been the success of the vaccine rollout in North America, which has allowed people to hit department stores once again.

$3.01billion

Nordstrom's Q1 revenue - a 44% YoY rise

Activewear and home purchasing remained strong, while sales had benefited from occasional wear buying, such as handbags, sunglasses and swimwear, as customers once again ventured onto the social scene post-lockdown.

Digital sales were one bright spot, up 23% compared with the same period last year and up 28% from the first quarter of 2019. Digital sales represented 46% of total sales during the quarter.

Yet, Nordstrom’s results are still off their pre-pandemic level. In 2019, net earnings were $496m, while in 2020, the company saw a net loss of $690m. In the first quarter, net sales may have been up 44% compared with the same period in fiscal 2020, during which stores were temporarily closed, but they were down 13% relative to the same period in fiscal 2019. It is this gap that Nordstrom needs to close.

 

When is Nordstrom reporting second-quarter results?

On 24 August.

 

What is Wall Street expecting?

Nordstrom is expected to post earnings of $0.28 a share, up from the $1.62 loss per share seen in the same period last year, according to data from Yahoo Finance. Revenue is pegged at $3.31bn, up 77.8% from the $1.86bn seen last year.

Over at Zacks Equity Research, the investment website’s most accurate estimate for Nordstrom is $0.30 a share, higher than its consensus estimate of $0.26 a share (as of 20 August). This suggests analysts have become more bullish on the stock recently, resulting in an expected earnings surprise of 13%. The most accurate estimate looks at recent revisions in estimates in the run-up to earnings, with the thinking being that an analyst moving their target will have the latest information.

$3.31billion

Nordstrom's forecasted revenue - a 77.8% YoY rise

Is a beat on the cards? Well, Nordstrom has missed analysts' expectations twice in the past four quarters. However, the performance of rival Macy’s might give investors reason for hope.

Macy’s second-quarter numbers posted last week saw sales surge 62%, with net sales coming in at $5.65bn and adjusted earnings of $1.29 a share – a huge beat on the expected $0.19 a share. Notably, the retailer announced it was reinstating its dividend, which had been passed since March 2020, and upped guidance for the top and bottom line numbers. That’s a confident performance, and if some of the same trends play out in Nordstrom’s results, then the stock could continue to recover.

Among the analysts polled on Yahoo Finance, Nordstrom has an average $35.88 price target, representing a 2.1% upside on 20 August close.

Disclaimer Past performance is not a reliable indicator of future results.

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