Can Nordstrom's Rack Support Its Stock in 2016?
Stock price movement
Nordstrom’s (JWN) stock price fell by 36.4% in 2015, and the upscale department store’s stock has continued to fall in 2016. As of January 19, 2016, Nordstrom’s stock price has declined by 8% on a year-to-date basis to $46.14. The company touched its 52-week low price of $44.49 on January 15, 2016.
Comparison with peers
The stock prices of Macy’s (M) and Kohl’s (KSS) fell by 46.7% and 20.1%, respectively, in 2015. Department store sales have been under pressure due to heightened competition from online retailers and off-price stores. Macy’s, the largest department store in terms of sales, reported disappointing holiday sales on January 6, which pushed its stock further down in 2016. To learn more on this, read Macy’s Reports Dismal Holiday Sales: Will Restructuring Help?
The stock prices of off-price retailers The TJX Companies (TJX) and Ross Stores (ROST) appreciated by 4.3% and 14.8%, respectively, in 2015. The broader market represented by the S&P 500 fell by 0.7% in 2015.
Nordstrom’s stock also underperformed the Consumer Discretionary Select Sector SPDR ETF (XLY), which appreciated by 9.1% in 2015. Nordstrom makes up 0.3% of XLY.
Earnings so far
Nordstrom’s adjusted EPS (earnings per share), which exclude the impact of extraordinary items, declined in the first three quarters of fiscal 2015. In 3Q15 ended October 31, 2015, Nordstrom’s adjusted EPS declined by 21.9% to $0.57, significantly missing the consensus Wall Street analyst estimate of $0.72.
Nordstrom’s growth investments associated with the Trunk Club acquisition and the ongoing growth plans in Canada have been impacting the company’s bottom line. Nordstrom lowered its sales and earnings guidance following dismal 3Q15 results. In part five of this series, we’ll discuss analysts’ recommendations for Nordstrom and their expectations for fiscal 2015 earnings. The iShares Global Consumer Discretionary ETF (RXI) has 29.7% exposure to the retail sector and 0.2% to Nordstrom.
In the first three quarters of fiscal 2015, Nordstrom’s sales growth was better than that of its department store industry peers Macy’s and Kohl’s. However, the company’s same-store sales were subdued in 3Q15, as we’ll discuss in the next part of this series.
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