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Will Pandemic-Led Costs Dent Nordstrom's (JWN) Q3 Earnings?

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Nordstrom, Inc. (JWN - Free Report) is scheduled to release third-quarter fiscal 2020 numbers on Nov 24, after the closing bell. In the last reported quarter, the fashion specialty retailer recorded a negative earnings surprise of 10.2%. The company delivered a negative earnings surprise of 18.5%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fiscal third-quarter earnings, pegged at a penny, has improved from a loss of 4 cents a share over the past seven days. However, this reflects a sharp decline of 98.8% from earnings of 81 cents in the year-ago period. Further, the consensus mark for sales is pegged at $3.1 billion, indicating a decrease of 15.3% from the year-ago quarter’s reported figure.

Factors to Note

Nordstrom continues to experience higher costs related to the pandemic, which along with elevated SG&A expenses and interest expenses, have been headwinds. Further, the company has been witnessing dismal margins due to soft sales volume and higher markdowns to clear inventory. These downsides are likely to get reflected in the fiscal third-quarter results.

Moreover, increased stay-at-home practices have been influencing consumers’ shopping patterns. As a result, altered preference from apparel, shoes and other accessories to more essential things amid the coronavirus pandemic might have adversely impacted the to-be-reported quarter’s performance.

However, in its last earnings call, management noted that it expects to deliver improved sales trends in the second half of fiscal 2020 and beyond as all stores have resumed operations.  Moreover, increased digital sales driven by expanded delivery options, including curbside pickup and returns, as well as improved supply-chain channels and marketing efforts are likely to provide some cushion to the fiscal third-quarter performance.

What Does the Zacks Model Say

Our proven model does not conclusively predict an earnings beat for Nordstrom this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Nordstrom carries a Zacks Rank #4 (Sell) and an Earnings ESP of -350.00%.

Nordstrom, Inc. Price and EPS Surprise

Stocks With a Favorable Combination

Here are a few companies you may want to consider, as our model shows that these have the right combination to post an earnings beat:

Signet Jewelers Limited (SIG - Free Report) has an Earnings ESP of +13.95% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. (BBY - Free Report) has an Earnings ESP of +14.92% and a Zacks Rank #2.

DICK’S Sporting Goods, Inc. (DKS - Free Report) has an Earnings ESP of +16.18% and a Zacks Rank #3.

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