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Here's Why Nordstrom (JWN) is Marching Ahead of the Industry

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Nordstrom Inc. (JWN - Free Report) has been gaining from solid demand, positive pricing, lower markdowns and broad-based growth across core categories and regions. Core categories, including men's and women's apparel, shoes, and designer, performed well. Consumers refreshing their wardrobes for office, travel and other social activities contributed to the quarterly growth. Also, it is progressing well with its More Reasons to Rack campaign, which led to increased brand awareness and boosted traffic.

This led to impressive first-quarter fiscal 2022 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and grew year over year. Total revenues grew 18.6% year over year, marking the seventh straight quarter of sequential top-line growth.

Driven by these factors, management raised the fiscal 2022 view. The company anticipates total year-over-year revenue growth of 6-8%, up from the aforementioned 5-7% rise. Adjusted earnings are envisioned to be $3.20-$3.50, which compares favorably with the prior stated $3.15-$3.50. EBIT margin is likely to be 5.8-6.2%, up from the earlier mentioned 5-6%. Adjusted EBIT is expected to be 5.6-6%.

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Consequently, shares of this Zacks Rank #3 (Hold) company have gained 3.7% in the past three months against the industry’s decline of 24.1%.

What’s More?

JWN remains focused on advancing in the technology space by boosting e-commerce and digital networks, and improving its supply-chain channels and marketing efforts. The company’s first-quarter fiscal 2022 digital sales remained stable year over year, representing 39% of net sales. The digital business witnessed gains from improved digital traffic across both Nordstrom and Nordstrom Rack, as well as increased utilization of the Buy Online, Pick Up In-Store service.

As part of its market strategy, the company launched additional pickup options, which received positive customer feedback. Buy Online Pick Up in Store also remains one of the most used facilities. In the said quarter, Nordstrom expanded its next-day order pickup service to more than 60 additional Rack stores. Also, its styling services, which form part of its Closer to You strategy, have been performing well.

Going ahead, management expects to expedite delivery, expand distribution and fulfillment centers, and the market level selection for in-store shopping, as well as same-day and next-day pickup. The company earlier completed the integration of Rack.com onto Nordstrom.com, thus, offering a better customer experience.

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 all of 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 offering a wide range of price points offered 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.

However, Nordstrom has been reeling under freight and labor expenses for some time now. The company has also been witnessing ongoing industry-wide supply-chain disruptions for quite some time now, leading to a lack of product availability, order cancellations, and shipment delays. This, and high labor costs and freight expenses act as deterrents.

Bottom Line

Despite the 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 moved up 2.3% over the past 30 days to $3.18. Topping it, a VGM Score of B and a long-term earnings growth rate of 6% reflects its inherent strength.

Stocks to Consider

Here are three better-ranked stocks to consider — Boot Barn Holdings (BOOT - Free Report) , Dillard’s (DDS - Free Report) and Canada Goose (GOOS - Free Report) .

Dillard’s operates as a departmental store chain, featuring fashion apparel and home furnishings. It presently sports a Zacks Rank #1 (Strong Buy). DDS has a trailing four-quarter earnings surprise of 224.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dillard’s current financial-year sales suggests growth of 6.1%, while the same for EPS indicates a decline of 33.9% from the year-ago period’s reported numbers. DDS has an expected EPS growth rate of 12.6% for three-five years.

Boot Barn, which provides western and work-related footwear, apparel and accessories, currently has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 25.2%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 17% and 4.4%, respectively, from the year-ago period’s reported figures. BOOT has an expected EPS growth rate of 20% for three-five years.

Canada Goose is the designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. It currently carries a Zacks Rank #2. GOOS has a trailing four-quarter earnings surprise of 65.9%, on average.

The Zacks Consensus Estimate for Canada Goose’s current financial year’s EPS suggests growth of 64.4% from the year-ago period’s reported figures. GOOS has an expected EPS growth rate of 27.4% for three-five years.