We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Nordstrom (JWN) Up 4.4% Since Last Earnings Report: Can It Continue?
Read MoreHide Full Article
A month has gone by since the last earnings report for Nordstrom (JWN - Free Report) . Shares have added about 4.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Nordstrom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Nordstrom reported fourth-quarter fiscal 2020 results, wherein earnings and sales beat the Zacks Consensus Estimate. However, both the top and bottom lines declined year over year. Despite the decline, the company’s results reflected an improvement on a sequential basis.
Q4 Highlights
Nordstrom posted earnings of 21 cents per share, beating the Zacks Consensus Estimate of 13 cents. However, the figure reflected a decline of 82.9% from 81 cents reported in the prior-year quarter. The better-than-expected earnings can be attributed to the positive response to the company’s gifting range, which represented 67% of sales and an improvement of 600 basis points (bps) from the year-ago quarter. Also, overhead cost reductions aided the bottom line.
However, the company’s actions to stock up inventory for the holiday season as well as delays in inventory flow in the reported quarter led to increased markdowns, which affected the bottom line and margins. Higher-than-expected selling and labor expenses, higher freight costs, and SG&A expense rate deleverage partly hurt earnings in the quarter under review.
Total revenues declined nearly 20% year over year to $3,645 million but surpassed the Zacks Consensus Estimate of $3,597 million. Net sales fell 20% to $3,551 million, while Credit Card net revenues declined 5% to $94 million. The better-than-expected top-line performance can be attributed to improved overall trends throughout the reported quarter, with broad-based improvement across the Nordstrom and Nordstrom Rack brands, both in stores and online.
Despite a year-over-year decline, the company’s top line reflected a sequential improvement of 600 bps from third-quarter fiscal 2020, after adjusting for the shift in the Anniversary Sale event. Notably, the company reported strong sequential improvement of 5% and 9%, respectively, at Nordstrom and Nordstrom Rack stores. Nonetheless, net sales for the Nordstrom brand dropped 18.6% year over year to $2,454 million in the fiscal fourth quarter. Sales for the Nordstrom Rack brand declined 22.9% to $1,097 million.
Further, momentum in digital business aided the top line. Notably, digital sales advanced 24% year over year in the reported quarter, surpassing the company’s forecast of a low-twenties percentage decline. Digital sales also represented 54% of Nordstrom’s sales, up from 35% in the year-ago quarter. Additionally, the company has expanded pickup options to 350 stores, including Nordstrom and Rack outlets. Consequently, about 10% of the online orders were picked up from stores in the reported quarter.
Nordstrom's gross profit margin contracted 160 bps to 33% in the reported quarter. The decline mainly stemmed from deleverage from lower sales volume and higher markdowns, offset by planned cost savings.
Ending inventory declined 3% from the last year. The company’s decision to increase receipts ahead of the holidays as well as delayed inventory flows led to higher inventory levels at the year-end. Most of the extra inventory reflected current receipts and non-seasonal merchandise. The company is taking actions to clear excess inventories in the seasonal and underperforming categories.
Selling, general and administrative (SG&A) expenses, as a percentage of sales, increased 470 bps to 35% in the fiscal fourth quarter. The SG&A deleverage was mainly driven by lower sales volume, higher labor and shipping expenses in the holiday season due to COVID-19, partly negated by planned cost savings. Notably, the company benefited from rebasing of cost structure, which resulted in an overhead cost reduction of 15% year over year. For fiscal 2020, the company’s cost savings exceeded its planned $370-$420 million.
EBIT for the reported quarter declined 90% to $30 million. Meanwhile, EBIT margin was 0.8% compared with 6.7% in the year-ago quarter, reflecting a 590-bps decline.
Other Financials
Nordstrom ended fiscal 2020 with cash and cash equivalents of $681 million, long-term debt (net of current liabilities) of $2,769 million, and total shareholders’ equity of $305 million. As of Jan 30, 2021, the company used $348 million of net cash for operating activities and spent $385 million as capital expenditure.
However, the company generated positive operating cash flow for the third straight quarter, with $88 million generated in the fiscal fourth quarter. This resulted in the generation of more than $425 million of operating cash flow in the past three quarters, enabling it to fully pay down its revolving line of credit. Consequently, the company ended fiscal 2020 with a strong balance sheet, having total liquidity of $1.5 billion, including $681 billion in cash.
Fiscal 2021 Outlook
Management remains on track to improve shareholder value through accelerated revenue growth, expanding operating margin, enhancing return on invested capital and generating cash flow. Though the COVID-19 headwinds are likely to persist and there remains uncertainty about the timing of recovery in customer demand, the company outlined its view for fiscal 2021. The guidance assumes that stores will remain open throughout 2021.
The company anticipates revenue growth of more than 25%, with digital representing about 50% of sales. Driven by expectations of improved gross margin and moderating of cost pressures, it expects EBIT margin of 3% of sales in fiscal 2021. Income tax rate is expected to be 27%.
For the first half of fiscal 2021, the company anticipates EBIT to be breakeven, suggesting 45% of total fiscal 2021 sales. This will take into account the shift of the anniversary sale event to July, starting this year, with one week falling into the fiscal third quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -68% due to these changes.
VGM Scores
At this time, Nordstrom has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Nordstrom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Nordstrom (JWN) Up 4.4% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Nordstrom (JWN - Free Report) . Shares have added about 4.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Nordstrom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Nordstrom Q4 Earnings Beat, Reflect Sequential Growth
Nordstrom reported fourth-quarter fiscal 2020 results, wherein earnings and sales beat the Zacks Consensus Estimate. However, both the top and bottom lines declined year over year. Despite the decline, the company’s results reflected an improvement on a sequential basis.
Q4 Highlights
Nordstrom posted earnings of 21 cents per share, beating the Zacks Consensus Estimate of 13 cents. However, the figure reflected a decline of 82.9% from 81 cents reported in the prior-year quarter. The better-than-expected earnings can be attributed to the positive response to the company’s gifting range, which represented 67% of sales and an improvement of 600 basis points (bps) from the year-ago quarter. Also, overhead cost reductions aided the bottom line.
However, the company’s actions to stock up inventory for the holiday season as well as delays in inventory flow in the reported quarter led to increased markdowns, which affected the bottom line and margins. Higher-than-expected selling and labor expenses, higher freight costs, and SG&A expense rate deleverage partly hurt earnings in the quarter under review.
Total revenues declined nearly 20% year over year to $3,645 million but surpassed the Zacks Consensus Estimate of $3,597 million. Net sales fell 20% to $3,551 million, while Credit Card net revenues declined 5% to $94 million. The better-than-expected top-line performance can be attributed to improved overall trends throughout the reported quarter, with broad-based improvement across the Nordstrom and Nordstrom Rack brands, both in stores and online.
Despite a year-over-year decline, the company’s top line reflected a sequential improvement of 600 bps from third-quarter fiscal 2020, after adjusting for the shift in the Anniversary Sale event. Notably, the company reported strong sequential improvement of 5% and 9%, respectively, at Nordstrom and Nordstrom Rack stores. Nonetheless, net sales for the Nordstrom brand dropped 18.6% year over year to $2,454 million in the fiscal fourth quarter. Sales for the Nordstrom Rack brand declined 22.9% to $1,097 million.
Further, momentum in digital business aided the top line. Notably, digital sales advanced 24% year over year in the reported quarter, surpassing the company’s forecast of a low-twenties percentage decline. Digital sales also represented 54% of Nordstrom’s sales, up from 35% in the year-ago quarter. Additionally, the company has expanded pickup options to 350 stores, including Nordstrom and Rack outlets. Consequently, about 10% of the online orders were picked up from stores in the reported quarter.
Nordstrom's gross profit margin contracted 160 bps to 33% in the reported quarter. The decline mainly stemmed from deleverage from lower sales volume and higher markdowns, offset by planned cost savings.
Ending inventory declined 3% from the last year. The company’s decision to increase receipts ahead of the holidays as well as delayed inventory flows led to higher inventory levels at the year-end. Most of the extra inventory reflected current receipts and non-seasonal merchandise. The company is taking actions to clear excess inventories in the seasonal and underperforming categories.
Selling, general and administrative (SG&A) expenses, as a percentage of sales, increased 470 bps to 35% in the fiscal fourth quarter. The SG&A deleverage was mainly driven by lower sales volume, higher labor and shipping expenses in the holiday season due to COVID-19, partly negated by planned cost savings. Notably, the company benefited from rebasing of cost structure, which resulted in an overhead cost reduction of 15% year over year. For fiscal 2020, the company’s cost savings exceeded its planned $370-$420 million.
EBIT for the reported quarter declined 90% to $30 million. Meanwhile, EBIT margin was 0.8% compared with 6.7% in the year-ago quarter, reflecting a 590-bps decline.
Other Financials
Nordstrom ended fiscal 2020 with cash and cash equivalents of $681 million, long-term debt (net of current liabilities) of $2,769 million, and total shareholders’ equity of $305 million. As of Jan 30, 2021, the company used $348 million of net cash for operating activities and spent $385 million as capital expenditure.
However, the company generated positive operating cash flow for the third straight quarter, with $88 million generated in the fiscal fourth quarter. This resulted in the generation of more than $425 million of operating cash flow in the past three quarters, enabling it to fully pay down its revolving line of credit. Consequently, the company ended fiscal 2020 with a strong balance sheet, having total liquidity of $1.5 billion, including $681 billion in cash.
Fiscal 2021 Outlook
Management remains on track to improve shareholder value through accelerated revenue growth, expanding operating margin, enhancing return on invested capital and generating cash flow. Though the COVID-19 headwinds are likely to persist and there remains uncertainty about the timing of recovery in customer demand, the company outlined its view for fiscal 2021. The guidance assumes that stores will remain open throughout 2021.
The company anticipates revenue growth of more than 25%, with digital representing about 50% of sales. Driven by expectations of improved gross margin and moderating of cost pressures, it expects EBIT margin of 3% of sales in fiscal 2021. Income tax rate is expected to be 27%.
For the first half of fiscal 2021, the company anticipates EBIT to be breakeven, suggesting 45% of total fiscal 2021 sales. This will take into account the shift of the anniversary sale event to July, starting this year, with one week falling into the fiscal third quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -68% due to these changes.
VGM Scores
At this time, Nordstrom has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Nordstrom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.