Time to Bail on Nordstrom Stock?
Most analysts are not upbeat about Nordstrom, Inc.’s (NYSE:JWN) fourth-quarter earnings. The largest U.S. luxury department store chain releases its report after the closing bell on Thursday.
Zacks Equity Research says it’s not sure whether Nordstrom will repeat its dismal earnings in the fourth quarter: “Considering the lowered fiscal 2015 guidance, we are not very optimistic about the company’s fourth-quarter results,” Zacks said. (Source: “Will Nordstrom (JWN) Repeat its Dismal Earnings Feat in Q4?” Yahoo! Finance, February 16, 2016.)
The apparel retailer posted dismal top- and bottom-line results for the August–October quarter, mainly impacted by soft sales trends across all networks and merchandise categories. This, along with the adverse impact of the company’s credit card portfolio sale, led Nordstrom to lower its outlook for fiscal 2015.
“However, the company has been benefiting from its customer strategy, leading to growth across channels. Also, Nordstrom’s strong brand image and continuous expansion endeavors bode well,” added Zacks. (Source: Ibid.)
Wall Street expects Nordstrom to earn $1.22 per share on sales of $4.22 billion for the three months ended January 31, according to Capital IQ data. That compares with the $1.32 per share the company earned and the $4.04 billion revenue it generated in the year-earlier period.
Analysts are also projecting the fashion specialty retailer to report $3.37 per share on sales of $14.43 billion for the full fiscal 2015 year.
The formerly high-flying Nordstrom stock has been declining since it reached its all-time high of $82.00 last March. Since then, it has lost 38%. It’s currently trading at $51.00. Its rival Macy’s stock has lost 44% since it reached a five-year high of $72.00 last June. Macy’s will report fourth-quarter results on Tuesday.
Based in Seattle, Washington, Nordstrom is still a family-run business 115 years after it started as a shoe store. It operates 323 stores in 39 states, including 121 full-line stores in the United States, Canada, and Puerto Rico; 194 Nordstrom Rack stores; two Jeffrey boutiques; and one clearance store.
On Wednesday, Jim Cramer, the host of CNBC’s Mad Money, said Nordstrom stock was among the many oversold companies that were finally able to rally over the past few days. (Source: “Jim Cramer’s Top Takeaways: Luxoft, Nordstrom, Domino’s, Honeywell,” The Street, February 18, 2016.)
“Nordstrom (JWN) reports tomorrow and all I can say is ‘wow’—wow to the fact that this stock has been clawing its way back to where it first fell after the last quarter, a truly horrendous earnings report,” Cramer, also a former hedge fund manager, said during his show. “That signals people are expecting that the worst won’t matter.” (Source: Ibid.)
Meanwhile, citing data from a social media–tracking firm, CNBC reported that Nordstrom is in the midst of a fundamental turnaround.
LikeFolio, a company that measures enthusiasm on social media for brands and products owned by public companies, said “purchase intent” for Nordstrom has almost doubled in the last four months. (Source: “Social data: Nordstrom trending before earnings,” CNBC, February 17, 2016.)
Another analyst, Michael Exstein of Credit Suisse, suggests that sales of Cheesecake Factory Inc (NASDAQ:CAKE), whose namesake locations are typically at high-end malls, are considered an indicator of Nordstrom comp sales, given the overlap in locations and customer base. (Source: “Nordstrom Earnings: Look at Cheesecake Factory,” Barron’s, February 17, 2016.)
Cheesecake Factory’s fourth-quarter comparable sales of 1.1%, announced this week, came in below the consensus view of 1.5% and were at the low end of the company’s outlook of one to two percent. Traffic deteriorated to 1.9%.
Do cheesecake sales really offer any hints about how Nordstrom’s earnings report will look?