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Nordstrom (JWN) Rises 20.9% in 3 Months: Is More Upside Left?
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Nordstrom Inc. (JWN - Free Report) has been experiencing solid demand for apparel and footwear, along with robust digital growth. Strength in home, active, designer, beauty and kids categories bodes well. The company launched more than 300 brands, including Open Edit, Farm Rio, Fanatics and ASOS DESIGN, in fiscal 2021. Alongside these, compelling merchandise, lower markdowns and the robust performance of Nordstrom Rack stores led to impressive fourth-quarter fiscal 2021 results, wherein both top and bottom lines grew year over year.
Total revenues grew 23% year over year to $4,486 million. This also marked the sixth straight quarter of sequential top-line growth. Net sales advanced 23% year over year, while credit card net revenues grew 10.6% from the prior-year quarter. Also, adjusted earnings of $1.23 per share improved significantly from the year-ago quarter’s 21 cents.
Nordstrom is focused on its long-term strategy, which aims to enhance its digital-first platform, expand the reach of Nordstrom Rack, gain market share, and deliver 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 all of its 20 top markets.
Nordstrom has been advancing in the technology space by boosting the e-commerce and digital networks, and improving its supply-chain channels and marketing efforts. Although fourth-quarter fiscal 2021 digital sales fell 1% year over year, the same rose 23% from the fourth quarter of fiscal 2019. In the fiscal fourth quarter, digital sales represented 44% of net sales compared with 54% in the year-ago period. The digital business witnessed gains from improved digital traffic across both Nordstrom and Nordstrom Rack, as well as increased utilization of Buy Online, Pick Up In-Store service. Its mobile app also witnessed a solid performance, with mobile users accounting for nearly 70% of the total digital traffic.
Per 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 $2 billion in the long run.
Management envisions its digital business to account for 50% of total sales. A rise in new customers, enhanced personalization and expanded product offering are also expected to aid revenue growth, profit margin and generating cash flow in the long run. Consequently, it predicted revenue growth in the low-single digits on an annual basis, with the operating income outpacing revenues in the long term. The EBIT margin is expected to be more than 6%, with an annual operating cash flow of more than $1 billion.
Driven by these factors, management issued an encouraging fiscal 2022 view. The company anticipates total year-over-year revenue growth of 5-7%. Adjusted earnings are envisioned to be $3.15-$3.50, with an EBIT margin of 5-6%. It also expects to lower its inventory in the first quarter of fiscal 2022.
Headwinds to Overcome
Nordstrom is still struggling to get back to the pre-pandemic levels. Notably, the top line declined 1% from the fourth quarter of fiscal 2019. Sales for the Nordstrom Rack brand reflect a decline of 5% from fourth-quarter fiscal 2019. SG&A expenses expanded 340 bps from fourth-quarter fiscal 2019 due to higher fulfillment and labor costs, offset by gains from the resetting of cost structures in 2020.
Also, the company has been witnessing ongoing industry-wide supply-chain disruptions for some time now, leading to product unavailability, order cancellations, and shipment delays. Higher freight and labor expenses remain concerning.
Wrapping Up
Despite freight and supply-chain woes, Nordstrom is likely to keep its stellar show on, driven by strong demand, solid online show and long-term growth strategy. The consensus mark for fiscal 2022 earnings has surged 61.8% over the past 30 days to $3.30. Topping it, a VGM Score of A and a long-term earnings growth rate of 6% reflect its inherent strength.
Tapestry presently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 28.2%, on average.
The Zacks Consensus Estimate for Tapestry’s current financial-year sales and EPS suggests growth of 17.5% and 22.9%, respectively, from the year-ago period’s reported numbers. TPR has an expected EPS growth rate of 12.5% for three-five years.
Tractor Supply currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 22%, on average.
The Zacks Consensus Estimate for Tractor Supply’s current financial-year sales and EPS suggests growth of 8.2% and 8%, respectively, from the year-ago period’s reported figures. TSCO has an expected EPS growth rate of 9.8% for three-five years.
Target currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 21.3%, on average.
The Zacks Consensus Estimate for Target’s current financial-year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the year-ago period’s reported figures. TGT has an expected EPS growth rate of 16.5% for three-five years.
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Nordstrom (JWN) Rises 20.9% in 3 Months: Is More Upside Left?
Nordstrom Inc. (JWN - Free Report) has been experiencing solid demand for apparel and footwear, along with robust digital growth. Strength in home, active, designer, beauty and kids categories bodes well. The company launched more than 300 brands, including Open Edit, Farm Rio, Fanatics and ASOS DESIGN, in fiscal 2021. Alongside these, compelling merchandise, lower markdowns and the robust performance of Nordstrom Rack stores led to impressive fourth-quarter fiscal 2021 results, wherein both top and bottom lines grew year over year.
Total revenues grew 23% year over year to $4,486 million. This also marked the sixth straight quarter of sequential top-line growth. Net sales advanced 23% year over year, while credit card net revenues grew 10.6% from the prior-year quarter. Also, adjusted earnings of $1.23 per share improved significantly from the year-ago quarter’s 21 cents.
Shares of this Zacks Rank #1 (Strong Buy) company have gained 20.9% in the past three months against the industry’s decline of 27.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
Nordstrom is focused on its long-term strategy, which aims to enhance its digital-first platform, expand the reach of Nordstrom Rack, gain market share, and deliver 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 all of its 20 top markets.
Nordstrom has been advancing in the technology space by boosting the e-commerce and digital networks, and improving its supply-chain channels and marketing efforts. Although fourth-quarter fiscal 2021 digital sales fell 1% year over year, the same rose 23% from the fourth quarter of fiscal 2019. In the fiscal fourth quarter, digital sales represented 44% of net sales compared with 54% in the year-ago period. The digital business witnessed gains from improved digital traffic across both Nordstrom and Nordstrom Rack, as well as increased utilization of Buy Online, Pick Up In-Store service. Its mobile app also witnessed a solid performance, with mobile users accounting for nearly 70% of the total digital traffic.
Per 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 $2 billion in the long run.
Management envisions its digital business to account for 50% of total sales. A rise in new customers, enhanced personalization and expanded product offering are also expected to aid revenue growth, profit margin and generating cash flow in the long run. Consequently, it predicted revenue growth in the low-single digits on an annual basis, with the operating income outpacing revenues in the long term. The EBIT margin is expected to be more than 6%, with an annual operating cash flow of more than $1 billion.
Driven by these factors, management issued an encouraging fiscal 2022 view. The company anticipates total year-over-year revenue growth of 5-7%. Adjusted earnings are envisioned to be $3.15-$3.50, with an EBIT margin of 5-6%. It also expects to lower its inventory in the first quarter of fiscal 2022.
Headwinds to Overcome
Nordstrom is still struggling to get back to the pre-pandemic levels. Notably, the top line declined 1% from the fourth quarter of fiscal 2019. Sales for the Nordstrom Rack brand reflect a decline of 5% from fourth-quarter fiscal 2019. SG&A expenses expanded 340 bps from fourth-quarter fiscal 2019 due to higher fulfillment and labor costs, offset by gains from the resetting of cost structures in 2020.
Also, the company has been witnessing ongoing industry-wide supply-chain disruptions for some time now, leading to product unavailability, order cancellations, and shipment delays. Higher freight and labor expenses remain concerning.
Wrapping Up
Despite freight and supply-chain woes, Nordstrom is likely to keep its stellar show on, driven by strong demand, solid online show and long-term growth strategy. The consensus mark for fiscal 2022 earnings has surged 61.8% over the past 30 days to $3.30. Topping it, a VGM Score of A and a long-term earnings growth rate of 6% reflect its inherent strength.
Other Stocks to Consider
Here are three other top-ranked stocks to consider — Tapestry (TPR - Free Report) , Target (TGT - Free Report) and Tractor Supply Company (TSCO - Free Report) .
Tapestry presently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 28.2%, on average.
The Zacks Consensus Estimate for Tapestry’s current financial-year sales and EPS suggests growth of 17.5% and 22.9%, respectively, from the year-ago period’s reported numbers. TPR has an expected EPS growth rate of 12.5% for three-five years.
Tractor Supply currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 22%, on average.
The Zacks Consensus Estimate for Tractor Supply’s current financial-year sales and EPS suggests growth of 8.2% and 8%, respectively, from the year-ago period’s reported figures. TSCO has an expected EPS growth rate of 9.8% for three-five years.
Target currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 21.3%, on average.
The Zacks Consensus Estimate for Target’s current financial-year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the year-ago period’s reported figures. TGT has an expected EPS growth rate of 16.5% for three-five years.