Nordstrom's Long-Term Strategies Bode Well: What's Ahead?
Leading fashion specialty retailer, Nordstrom Inc. JWN is doing well on the back of its robust long-term strategies, continued focus on store expansion, efforts to remain updated with the evolving industry trends and impressive earnings history. These factors have aided it to retain the Zacks Rank #3 (Hold) and also carries a VGM Style Score of “A”.
Further, Nordstrom's shares have substantially outpaced the broader industry year to date. While the stock dipped 1.6%, the Zacks categorized Retail – Apparel and Shoes industry slumped 19.3%.
Further, the company’s fiscal year estimates have witnessed an uptrend in the last 30 days. The Zacks Consensus Estimate for fiscal 2017 and fiscal 2018 have both increased to $2.96 per share, representing an upside of 6 cents and 1 cent, respectively.
What’s Aiding the Stock Performance?
Increase in stock price can be attributed to the company’s solid earnings trend as evident from its fourth consecutive earnings beat in first-quarter fiscal 2017. Nordstrom posted solid first-quarter fiscal 2017 earnings, which topped estimates and improved year over year. Results benefited from solid inventory management and operational efficiencies, along with sales growth in Nordstrom Rack and strong eCommerce performance, which now represents nearly 24% of the company’s sales.
Further, the company reiterated outlook for fiscal 2017, anticipating net sales to increase nearly 3–4% and flat comps. The company envisions fiscal 2017 earnings per share in the range of $2.75–$3.00.
Moreover, recent contemplation of the Nordstrom family to acquire the company and go private, has aided the share prices to rally.
The company’s three Co-Presidents – Blake W. Nordstrom, Peter E. Nordstrom and Erik B. Nordstrom; President of Stores – James F. Nordstrom; Chairman – Emeritus Bruce A. Nordstrom, and Anne E. Gittinger, together constitutes the Nordstrom family. The Seattle-based company announced that the family is seeking viable options of taking the company private, by buying all the outstanding shares of Nordstrom.
Apart from this, Nordstrom is making significant progress with respect to customer-based strategy and is on track to reach its long-term growth target of $20 billion by 2020. Moreover, it is focused on advancing in the technology space by boosting eCommerce and digital networks along with improving its supply-chain channels and marketing efforts. We also commend the company’s strong brand image, cost saving initiatives and store expansion efforts. We believe these efforts will help it to deliver sustainable growth over the long term.
What are the Possible Deterrents?
However, Nordstrom remains susceptible to the macroeconomic headwinds looming over the retail environment. The company’s global presence also exposes it to the risk of adverse foreign currency fluctuations, among other risks associated with operating internationally. Further, it faces stiff competition from other major players that poses threats to operating performance and market share.
Bottom Line
While the obstacles shall prevail for Nordstrom, we believe its growth efforts should continue to aid it counter these headwinds. Moreover, the company’s strategies suggest that it is on track to deliver sustainable growth over the long term. So, we believe holding on to the stock is a good idea at the moment.
Stocks to Consider
Better-ranked stocks in the same industry include The Children's Place Inc. PLCE, Canada Goose Holdings Inc. GOOS and J.Jill Inc. JILL. While Children's Place sports a Zacks Rank #1 (Strong Buy), both Canada Goose and J.Jill carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Children's Place has an average positive earnings surprise of 36.6% in the trailing four quarters. The stock has a long-term growth rate of 8%.
Canada Goose, with long-term earnings per share growth rate of 32.8%, has surged 37.5% year to date.
J.Jill has witnessed a 6.5% growth year to date. The stock has a long-term growth rate of 19.8%.
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