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Nordstrom (JWN) Well Poised on Growth Efforts Amid Inflation
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Nordstrom Inc. (JWN - Free Report) has been gaining from its strength in core categories in men's and women's apparel and shoes. Its Closer to You strategy and supply-chain-optimization efforts also bode well. This led to its third-quarter fiscal 2022 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. This marked the fourth straight quarter of a bottom-line beat and the ninth consecutive quarter of a top-line beat.
The company has been making efforts to drive efficiency and improve customer experience via faster order fulfillment. It is also on track to reduce inventory and optimize product mix. Also, increased focus on Nordstrom Rack bodes well. Notably, Nordstrom Rack reduced store-based order fulfillment and raised the minimum order amount for free ship-to-store delivery on rack.com.
These actions led to lesser order cancellations, simplified rack operations and improved profitability. The company continues focusing on introducing more premium brands at Rack, better assortment and increased brand awareness. Driven by these factors, it expects to optimize the Rack product mix by mid-2023.
Nordstrom is focused on its long-term strategy, which aims at enhancing its digital-first platform, expanding the reach of Nordstrom Rack, gaining market share and delivering growth. As part of the strategy, the company continues to scale enhanced capabilities like the expansion of order pickup and ship-to-store to all Nordstrom Rack stores. It also expanded its market strategy to its 20 top markets.
As part of its closer-to-you strategy, the company aims to link stores and services to expedite deliveries, expand online offerings, and add cheaper merchandise at its Rack off-price stores, to improve customers’ shopping experiences. It is also on track to integrate Nordstrom Rack assets and offer a wide range of price points at Nordstrom Rack. Increased focus on distribution capabilities, along with improved connectivity of physical and digital inventory, is likely to contribute to Nordstrom Rack sales by roughly $2 billion in the long term.
Driven by these factors, this Zacks Rank #3 (Hold) company expects total revenue growth of 5-7% from the last fiscal year’s reported figure. Adjusted earnings are envisioned to be $2.30-$2.60. The EBIT margin is likely to be 4.1-4.4%, reflecting a year-over-year improvement, driven by lower SG&A. Meanwhile, the adjusted EBIT margin is expected to be 4.3-4.7%.
Shares of JWN have lost 19.7% year to date, outperforming the industry’s decline of 36.3%.
Image Source: Zacks Investment Research
However, Nordstrom continues to reel under declining discretionary spending stemming from inflation. It witnessed a sluggish year-over-year performance during the fiscal third quarter. Adjusted earnings of 20 cents per share compared unfavorably with the year-ago quarter’s 39 cents.
Total revenues of $3,546 million declined 2.5% from the year-ago quarter due to the shift in the timing of the Anniversary sale, wherein a day of the sale was part of the third quarter of 2022. This had a 200-basis-points (bps) negative impact on sales.
Net sales fell 2.9% from the year-ago quarter to $3,433 million. Net sales for the Nordstrom brand decreased 3.4% from the year-ago quarter to $2,264 million. Sales for the Nordstrom Rack brand dipped 1.9% from the year-ago quarter to $1,169 million due to muted demand, particularly from lower-income customers.
Also, higher markdowns dented Q3 margins. In third-quarter fiscal 2022, Nordstrom’s gross profit margin contracted 190 bps from the year-ago quarter to 33.2%. Adjusted EBIT was $73 million in the reported quarter, down 42.5% from the year-ago quarter. SG&A expenses, as a percentage of sales, expanded 200 bps to 36.4% due to supply-chain technology and a related asset impairment charge, partly offset by reduced fulfillment expenses.
Bottom Line
Despite the inflation concerns and higher markdown, Nordstrom is likely to sustain momentum, driven by strong demand, solid online show and long-term growth strategy. The consensus mark for fiscal 2022 earnings has moved up 2.5% over the past 30 days to $2.42. Topping it, a VGM Score of A and a long-term earnings growth rate of 17.6% reflects its inherent strength.
Wingstop currently sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 11%. Shares of WING have declined 9.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the year-ago period’s reported levels.
Ross Stores, an off-price retailer of apparel and home accessories in the United States, currently sports a Zacks Rank #1. ROST has an expected EPS growth rate of 10.5% for three to five years.
The Zacks Consensus Estimate for Ross Stores’ current-year sales and EPS suggests declines of 1.6% and 11.7%, respectively, from the year-ago period’s reported figures. ROST has a trailing four-quarter earnings surprise of 10.5%, on average.
Chipotle Mexican Grill, an operator of fast-casual restaurants, currently carries a Zacks Rank of 2 (Buy). CMG’s expected EPS growth rate for three to five years is 23.4%.
The Zacks Consensus Estimate for Chipotle Mexican Grill’s current financial-year revenues and EPS suggests growth of 15.2% and 30.8%, respectively, from the year-ago reported figures. CMG has a trailing four-quarter earnings surprise of 4.1%, on average.
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Nordstrom (JWN) Well Poised on Growth Efforts Amid Inflation
Nordstrom Inc. (JWN - Free Report) has been gaining from its strength in core categories in men's and women's apparel and shoes. Its Closer to You strategy and supply-chain-optimization efforts also bode well. This led to its third-quarter fiscal 2022 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. This marked the fourth straight quarter of a bottom-line beat and the ninth consecutive quarter of a top-line beat.
The company has been making efforts to drive efficiency and improve customer experience via faster order fulfillment. It is also on track to reduce inventory and optimize product mix. Also, increased focus on Nordstrom Rack bodes well. Notably, Nordstrom Rack reduced store-based order fulfillment and raised the minimum order amount for free ship-to-store delivery on rack.com.
These actions led to lesser order cancellations, simplified rack operations and improved profitability. The company continues focusing on introducing more premium brands at Rack, better assortment and increased brand awareness. Driven by these factors, it expects to optimize the Rack product mix by mid-2023.
Nordstrom is focused on its long-term strategy, which aims at enhancing its digital-first platform, expanding the reach of Nordstrom Rack, gaining market share and delivering growth. As part of the strategy, the company continues to scale enhanced capabilities like the expansion of order pickup and ship-to-store to all Nordstrom Rack stores. It also expanded its market strategy to its 20 top markets.
As part of its closer-to-you strategy, the company aims to link stores and services to expedite deliveries, expand online offerings, and add cheaper merchandise at its Rack off-price stores, to improve customers’ shopping experiences. It is also on track to integrate Nordstrom Rack assets and offer a wide range of price points at Nordstrom Rack. Increased focus on distribution capabilities, along with improved connectivity of physical and digital inventory, is likely to contribute to Nordstrom Rack sales by roughly $2 billion in the long term.
Driven by these factors, this Zacks Rank #3 (Hold) company expects total revenue growth of 5-7% from the last fiscal year’s reported figure. Adjusted earnings are envisioned to be $2.30-$2.60. The EBIT margin is likely to be 4.1-4.4%, reflecting a year-over-year improvement, driven by lower SG&A. Meanwhile, the adjusted EBIT margin is expected to be 4.3-4.7%.
Shares of JWN have lost 19.7% year to date, outperforming the industry’s decline of 36.3%.
Image Source: Zacks Investment Research
However, Nordstrom continues to reel under declining discretionary spending stemming from inflation. It witnessed a sluggish year-over-year performance during the fiscal third quarter. Adjusted earnings of 20 cents per share compared unfavorably with the year-ago quarter’s 39 cents.
Total revenues of $3,546 million declined 2.5% from the year-ago quarter due to the shift in the timing of the Anniversary sale, wherein a day of the sale was part of the third quarter of 2022. This had a 200-basis-points (bps) negative impact on sales.
Net sales fell 2.9% from the year-ago quarter to $3,433 million. Net sales for the Nordstrom brand decreased 3.4% from the year-ago quarter to $2,264 million. Sales for the Nordstrom Rack brand dipped 1.9% from the year-ago quarter to $1,169 million due to muted demand, particularly from lower-income customers.
Also, higher markdowns dented Q3 margins. In third-quarter fiscal 2022, Nordstrom’s gross profit margin contracted 190 bps from the year-ago quarter to 33.2%. Adjusted EBIT was $73 million in the reported quarter, down 42.5% from the year-ago quarter. SG&A expenses, as a percentage of sales, expanded 200 bps to 36.4% due to supply-chain technology and a related asset impairment charge, partly offset by reduced fulfillment expenses.
Bottom Line
Despite the inflation concerns and higher markdown, Nordstrom is likely to sustain momentum, driven by strong demand, solid online show and long-term growth strategy. The consensus mark for fiscal 2022 earnings has moved up 2.5% over the past 30 days to $2.42. Topping it, a VGM Score of A and a long-term earnings growth rate of 17.6% reflects its inherent strength.
Stocks to Consider
Here are three better-ranked stocks to consider, namely Wingstop (WING - Free Report) , Ross Stores (ROST - Free Report) and Chipotle Mexican Grill (CMG - Free Report) .
Wingstop currently sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 11%. Shares of WING have declined 9.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the year-ago period’s reported levels.
Ross Stores, an off-price retailer of apparel and home accessories in the United States, currently sports a Zacks Rank #1. ROST has an expected EPS growth rate of 10.5% for three to five years.
The Zacks Consensus Estimate for Ross Stores’ current-year sales and EPS suggests declines of 1.6% and 11.7%, respectively, from the year-ago period’s reported figures. ROST has a trailing four-quarter earnings surprise of 10.5%, on average.
Chipotle Mexican Grill, an operator of fast-casual restaurants, currently carries a Zacks Rank of 2 (Buy). CMG’s expected EPS growth rate for three to five years is 23.4%.
The Zacks Consensus Estimate for Chipotle Mexican Grill’s current financial-year revenues and EPS suggests growth of 15.2% and 30.8%, respectively, from the year-ago reported figures. CMG has a trailing four-quarter earnings surprise of 4.1%, on average.