Back to top

Is Omni-Channel Growth Key to the Success of Nordstrom (JWN)?

Read MoreHide Full Article

Nordstrom, Inc. (JWN - Free Report) remains committed toward bolstering its omni-channel capabilities, including store-growth strategy and e-commerce expansion. Further, its customer-based strategy that focuses on leveraging the company’s brand strength, providing excellence services and offering compelling products appear impressive.

Backed by these strategic efforts, the company delivered its ninth earnings beat in the trailing 10 quarters and fifth positive sales surprise in last six quarters. As a result, the stock has outperformed the industry in a year’s time. Shares of the company have rallied 16.1% against the industry's 1.5% decline.



However, Nordstrom's third-quarter fiscal 2018 results were partly hurt by a non-recurring anticipated credit-related charge of $72 million. This charge is related to the imposition of higher interests by the company while reviewing customers’ credit card accounts. Consequently, its shares have lost 22.9% in a month.

Nevertheless, management expects to refund less than 4% of its cardholders, with amounts less than $100. Encouragingly, Nordstrom has a Zacks Rank #3 (Hold) and an expected long-term earnings growth rate of 6%. Let’s delve deep.

Growth Catalysts

Nordstrom has been consistently focusing on its store-expansion strategy to enhance market share and drive the top line. Also, it remains keen on prioritizing investments in the top North American markets. So far in fiscal 2018, the company introduced 16 and closed two stores, while it relocated one store.

Moreover, the company has been progressing well with its expansion strategy in Canada by opening three Rack stores, and is on track to open three more outlets this fiscal. Overall, the company envisions a $1 billion sales opportunity from its expansion in Canada by 2020. Further, it opened two Rack stores in the United States, remaining on track to open four stores in fiscal 2018.

The company is also focused on advancing in the technology space by boosting e-commerce and digital networks, and enhancing its supply-chain channels and marketing efforts. In third-quarter fiscal 2018, it registered 20% growth in digital sales. Meanwhile, Nordstrom’s generational investments in new markets and digital businesses remain sturdy and contributed roughly 50% to sales growth year to date. With regard to cost savings, the company plans to strike a balance between its sales and expense growth.

Additionally, Nordstrom’s significant progress on its customer-based strategy places it well to reach the long-term revenue target of $20 billion by 2020. Further, the company is making amendments to its operating model in response to the constant slowdown in mall traffic resulting from customers’ shift to online shopping.

Wrapping Up

While the afore-mentioned initiatives look impressive, higher cost of investments toward technology, supply chain and marketing are leading to increased expenses. This might remain detrimental to Nordstrom’s profitability.

Nevertheless, we believe the company’s robust omni-channel efforts along with other strategic endeavors will help it to deliver sustainable growth over the long term.

Want Solid Retail Stocks? Count on These

Boot Barn Holdings, Inc. (BOOT - Free Report) has an impressive long-term earnings growth rate of 23% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch Co. (ANF - Free Report) delivered average positive earnings surprise of 88.6% in the trailing four quarters. The company carries a Zacks Rank #2 (Buy).

Foot Locker, Inc. (FL - Free Report) is also a Zacks Ranked #2 stock, which has outpaced the earnings estimates in each of the last four quarters by an average of 6.8%.

More Stock News: This Is Bigger than the iPhone!
 
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
 
Click here for the 6 trades >>



More from Zacks Analyst Blog

You May Like

Published in