Earnings Preview: Nordstrom - Analyst Blog
May 10 2011 - 6:45AM
Zacks
Nordstrom Inc. (JWN) is scheduled to release
its first-quarter 2011 results on Thursday, May 12, 2011. The Zacks
Consensus Estimate is 66 cents a share for the first quarter of
fiscal 2011. This represents a year-over-year estimated growth of
26.9%.
Fourth Quarter Performance
Nordstrom posted earnings growth of 35.0% to reach $1.04 per
share in the fourth quarter of fiscal 2010 from 77 cents per share
earned in the year-ago period. Earnings per share beat the Zacks
Consensus Estimate of $1.00 per share.
Nordstrom’s same-store sales and top-line trends were also
encouraging. Total revenue grew 10.9% to $2,916 million from $2,640
million in the prior-year period on the heels of a 6.7% growth in
same-store sales. Total revenue marginally fell short of the Zacks
Consensus Estimate of $2,918 million.
Earnings Guidance
The company forecasts fiscal 2011 earnings per share in the range
of $2.95 to $3.10.
Agreement of Analysts
Over the last 30 days, 7 out of 12 analysts moved their
estimates in the upward direction with no movement downward for the
first quarter of fiscal 2011. This implies that most of the
analysts are positive on the outlook and do not foresee any
downward pressure on the result. For fiscal 2011, 10 of 13 analysts
increased their estimates with no downward movement by any analyst
over the last 30 days.
In the last 7 days, 2 out of 12 analysts have increased their
estimates while 1 has decreased the same for the first quarter of
fiscal 2011. No downward movement has been made in estimates by any
analyst for fiscal 2011, over the last 7 days, with 1 analyst
raising the estimate.
Magnitude of Estimate Revisions
Taking into effect the upward revision in estimates by analysts
in the last 30 days for the first quarter of fiscal 2011, the
consensus estimate has moved up by 4 cents to 66 cents a share.
Over the last 30 days estimates for fiscal 2011 has increased by 6
cents to $3.12 per share to account for upward revision by 10
analysts. Over the last 7 days, there has been no movement in
estimates for the first quarter and fiscal 2011.
Earnings Surprise
Considering earnings surprises, the stock has not been steady
over the last four quarters, with a mix of positive and negative
surprises ranging between a low of -5.5% and a high of 4.0%. The
average remained positive at 0.8%.
The upside potential for the estimate in the first quarter 2011,
essentially a proxy for future earnings surprises, currently stands
at 3.0%.
Our Recommendation
We have maintained our long-term 'Neutral' recommendation on
Nordstrom. However, the company has a Zacks #2 Rank, implying a
short-term 'Buy' rating on the stock.
Nordstrom is one of the leading players in the extremely
fragmented specialty retail sector. The company offers a broad
array of over 500 brands, targeted toward the entire family,
through a strong nationwide network of 204 stores situated across
28 states. The company has a wide line-up of globally recognized
brands, catering primarily to the upscale segment, enabling
Nordstrom to generate high-margin revenue. Consequently, this gives
the company a competitive edge and bolsters its well-established
position in the market.
Moreover, the acquisition of online private sale leader
HauteLook Inc. will help Nordstrom in building multi-channel
retailing. The acquisition will facilitate the company to increase
its direct business capabilities, implement enterprise-wide
inventory management system, sell directly to online customers and
enhance the company’s customer service.
However, consumer confidence and spending behavior may dampen
due to macroeconomic factors including interest rate hikes,
increase in fuel and energy costs, credit availability, high
unemployment levels, and high household debt levels, which may
negatively affect their disposable income and, in turn, the
company’s growth and profitability.
Above all, Nordstrom operates in a highly fragmented specialty
retail sector and faces intense competition from other
well-established players, such as Gap Inc. (GPS),
Limited Brands Inc. (LTD) and Abercrombie
& Fitch Co. (ANF). The company primarily competes on
the basis of fashion, quality and service. To retain the existing
market share, the company may resort to aggressive pricing, which
could affect its margins.
ABERCROMBIE (ANF): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
LIMITED INC (LTD): Free Stock Analysis Report
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