Nordstrom Beats Wall Street and Rallies Due to an Updated Guidance
In this article, let's take a look at Nordstrom Inc. (JWN), a $15.54 billion market cap company, which is a specialty retailer of apparel and accessories, widely known for its emphasison service.
Trading higher
The stock was trading up more than 5% in today's premarket session, after it finished in negative territory yesterday because it reported better-than-projected results for its fiscal second quarter and has raised its financial projections.
The Seattle-based retailer reported EPS of $0.93 for the quarter, beating the estimations of $0.90 on revenue of $3.7 billion, which also beats expectations of $3.67 billion.
Moreover, the company raised its FY15 sales growth guidance in the range of to 8.5 to 9.5% from 7 to 9%. Further, it expects EPS in the range of $3.70 and $3.80 while analyst's estimates are $3.74.
Expansion
Nordstrom is a well-known leader in the department store business, and it has become famous due to its high quality and fashionable products. Playing in a highly competitive industry, I think the most important driver is simple, the brand. The retailer offers a broad range of high-quality fashion brands through multiple channels. This "brand-effect" makes that the company does not need to enter in promotions, so there is no necessity to cheapen its brands.
Nordstrom had 118 full-line stores and 178 Nordstrom Rackstores as of July 2015. The Nordstrom full-line and online stores provide customers with a consistent merchandise assortment across channels. It plans to increase Rack doors to 230 by 2016. This is in line with current actions; during 2015 the firm has opened two full-line stores and 11 Nordstrom Rack locations. For the next quarter, it will continue with three full-line stores and 16 Nordstrom Rack locations.
This is important because sales continue to grow. Sales at stores of the full line grew by almost 5% year over year and Nordstrom Rack�s growth was about 1.7%.
Relative valuation
In terms of valuation, the stock sells at a trailing P/E of 20.51x, trading at a discount compared to a median of 22.0x for the industry. To use another metric, its price-to-book ratio of 5.59x indicates a premium versus the industry median of 1.76x while the price-to-sales ratio of 1.05x is above the industry average of 0.71x.
Final comment
As outlined in the article, for the near future the company plans to operate more full-line stores. Further, we continue to believe that the growth will come from new channels such as the Rack stores. Also, full-line stores, free-standing shoe stores or online stores are ready for further growth aided primarily by a boost from the cosmetics and women's apparel divisions.
John Hussman (Trades, Portfolio) initiated a new position in the stock in the second quarter with 50,000 shares. Pioneer Investments (Trades, Portfolio) upped its stake 0.09% to 861,665 shares.
Disclosure: Omar Venerio holds no position in any stocks mentioned
This article first appeared on GuruFocus.
