Expect Nordstrom Range-Bound

Nordstrom (JWN - Snapshot Report) reported first quarter earnings per share of $0.54, which matched our estimate, but was $0.05 ahead of consensus estimates. The upside was due to better-than-expected expense controls and share repurchases. Even so, the company issued guidance that was below its previous outlook. Nordstrom now expects second quarter EPS of $0.65-$0.70 vs. our prior estimate of $0.72 and full-year EPS of $2.65-$2.80 vs. its previous guidance of $2.75-$2.90.

We are lowering our 2008 and 2009 EPS estimates accordingly. While we think JWN is one of the better ways to invest in retail, its stock is likely to be range bound for the next few quarters. As a result, we maintain our Hold rating and $39 target price, which is 14x our fiscal year 2008 EPS estimate.

JWN shares now trade at 13.5x our fiscal year 2008 EPS estimate and 12.6x our fiscal year 2009 EPS estimate. JWN shares trade at a slight premium to its long-term growth rate, but well below its 5-year average P/E of around 19x. Given the difficult environment for retailers, we prefer to remain neutral on JWN shares. As such, we think the stock will trade in-line with the overall market for the next six months.

Read the full analyst report on JWN.