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Nordstrom (JWN) to Report Q1 Earnings: What's in Store?

Zacks Equity Research

Nordstrom, Inc. JWN is scheduled to release first-quarter fiscal 2019 numbers on May 21, after the closing bell.

Notably, the company has a robust earnings surprise history, having surpassed estimates in 10 of the trailing 11 quarters. Furthermore, it has an average four-quarter positive earnings surprise of 11.2%.

However, the Zacks Consensus Estimate for first-quarter earnings is pegged at 46 cents, indicating a decline of 9.8% from the year-earlier reported figure. Estimates remained stable over the past 30 days. For quarterly revenues, the consensus mark is estimated at $3.55 billion, implying a 0.3% decrease from the year-ago reported number.

Nordstrom, Inc. Price and EPS Surprise

Nordstrom, Inc. Price and EPS Surprise

Nordstrom, Inc. price-eps-surprise | Nordstrom, Inc. Quote

Factors Likely to Influence 1Q19

Nordstrom has been witnessing soft gross margins due to higher expenses and lower sales. Increased markdowns owing to soft sale trends in Full-Price stores and higher promotions hurt gross margin in the last reported quarter. This might remain a concern and dent gross margin in the fiscal first quarter.

Nordstrom’s growth strategy focused on the enhancement of digital experience and increased investments in supply chain bode well for the long term. However, investments related to occupancy, technology, supply chain and marketing expenses have resulted in increased near-term costs. Additionally, rise in supply chain costs, reflecting higher fulfillment and delivery expenses in relation to digital growth, is leading to higher expenses and weighing on margins. These apart, the company has been making investments in its West Coast supply chain. All these expenses might negatively impact the company’s operating margin and profitability.

Nevertheless, Nordstrom’s robust omni-channel initiatives including store-expansion strategy and advancement in the technology space are likely to aid its top line in the quarter to be reported. Meanwhile, the company has been progressing well with its expansion in Canada and introduced six Rack stores in fiscal 2018. Further, management also remains keen on domestic store expansion. Apparently, the company introduced a men’s store in New York City and remains on track to open women’s store in October 2019.

Nordstrom’s significant progress on its customer-based strategy is an added positive. This strategy focuses on three strategic factors — leveraging the company’s brand strength, providing excellence services and offering compelling products to its customers.

A Glance at Zacks Model

Our proven model does not conclusively show that Nordstrom is likely to beat estimates in first-quarter fiscal 2019. A stock needs to have — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) as well as a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Nordstrom has a Zacks Rank #3, its Earnings ESP of -1.07% makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Dillard's, Inc. DDS has an Earnings ESP of +3.95% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ross Stores, Inc. ROST has an Earnings ESP of +0.77% and a Zacks Rank #3.

Dollar Tree, Inc. DLTR has an Earnings ESP of +0.51% and a Zacks Rank #3.

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