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Can Nordstrom's (JWN) Strategic Efforts Drive Q1 Earnings?

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Nordstrom, Inc. (JWN - Free Report) is slated to report first-quarter fiscal 2018 results on May 17, after the closing bell. In the last reported quarter, it pulled off negative earnings surprise of 3.2%. However, the company outpaced earnings estimates in the preceding six quarters. Nordstrom has delivered an average earnings beat of 16.8% in the trailing four quarters.

The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at 42 cents, mirroring a year-over-year decline of 2.3%. Nevertheless, the consensus mark has remained stable in the last 30 days.

Nordstrom, Inc. Price, Consensus and EPS Surprise

Nordstrom, Inc. Price, Consensus and EPS Surprise | Nordstrom, Inc. Quote

 

Let’s see how things are shaping up prior to the earnings announcement.

Factors at Play

Nordstrom’s constant efforts to enhance footprint and expand e-commerce capabilities are commendable. The company has been persistently focused on store-expansion strategy to gain market share and generate higher sales. Furthermore, Nordstrom has been smoothly progressing with its expansion in Canada. In fact, the company also runs in coherence with the evolving retail industry that is focused on offering maximum choices to its customers for enhancing their shopping experience. These endeavors are likely to drive Nordstrom’s top line and profitability.

Notably, analysts polled by Zacks expect revenues of $3,444 million, up nearly 5% from first-quarter fiscal 2017.

Additionally, Nordstrom is making significant progress with respect to its customer-based strategy and is on track to reach long-term growth target of $20 billion by 2020. With regard to cost savings, the company plans to strike a balance between sales and expense growth. Further, management is making amendments to its operating model in response to the constant slowdown in mall traffic resulting from customers’ shift to online shopping. Also, it is focused on advancing in the technology space, by boosting e-commerce and digital networks, and improving its supply-chain channels and marketing efforts. These growth initiatives are likely to add value to the company’s first-quarter results.

All these above-mentioned endeavors have raised investors’ confidence in the stock. In the past six months, shares of this leading fashion retailer have rallied 27.2%, outperforming the industry’s gain of 13%.

However, on the darker side, investments related to occupancy, technology, supply chain and marketing expenses are likely to weigh on the company’s near-term margins. In the last reported quarter, Nordstrom's Retail gross profit margin contracted 42 basis points (bps) mainly on account of increased occupancy expenses related to new store expansion for Nordstrom Rack. In addition, the company’s accelerated investments toward technology, supply chain and marketing led to a rise of 243 bps in SG&A expenses in fourth-quarter fiscal 2017.

All said, let’s wait and see what lies ahead of Nordstrom when it reports quarterly results.

What Does the Zacks Model Unveil?

Our proven model shows that Nordstrom is likely to beat earnings estimates in the fiscal first quarter. This is because it has the right combination of the two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Nordstrom has an Earnings ESP of +8.97% and a Zacks Rank #3, which make us confident of an earnings beat.

Other Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these also have the right combination of elements to post an earnings beat:

Urban Outfitters, Inc. (URBN - Free Report) has an Earnings ESP of +1.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. (BURL - Free Report) has an Earnings ESP of +0.69% and a Zacks Rank of 3.

Abercrombie & Fitch Co. (ANF - Free Report) has an Earnings ESP of +5.30% and a Zacks Rank #3.

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