Nordstrom Inc. (JWN) is scheduled to release its first-quarter 2011 results on Thursday, May 12, 2011. The Zacks Consensus Estimate is 66 cents a share for the first quarter of fiscal 2011. This represents a year-over-year estimated growth of 26.9%.
Fourth Quarter Performance
Nordstrom posted earnings growth of 35.0% to reach $1.04 per share in the fourth quarter of fiscal 2010 from 77 cents per share earned in the year-ago period. Earnings per share beat the Zacks Consensus Estimate of $1.00 per share.
Nordstrom’s same-store sales and top-line trends were also encouraging. Total revenue grew 10.9% to $2,916 million from $2,640 million in the prior-year period on the heels of a 6.7% growth in same-store sales. Total revenue marginally fell short of the Zacks Consensus Estimate of $2,918 million.
Earnings Guidance
The company forecasts fiscal 2011 earnings per share in the range of $2.95 to $3.10.
Agreement of Analysts
Over the last 30 days, 7 out of 12 analysts moved their estimates in the upward direction with no movement downward for the first quarter of fiscal 2011. This implies that most of the analysts are positive on the outlook and do not foresee any downward pressure on the result. For fiscal 2011, 10 of 13 analysts increased their estimates with no downward movement by any analyst over the last 30 days.
In the last 7 days, 2 out of 12 analysts have increased their estimates while 1 has decreased the same for the first quarter of fiscal 2011. No downward movement has been made in estimates by any analyst for fiscal 2011, over the last 7 days, with 1 analyst raising the estimate.
Magnitude of Estimate Revisions
Taking into effect the upward revision in estimates by analysts in the last 30 days for the first quarter of fiscal 2011, the consensus estimate has moved up by 4 cents to 66 cents a share. Over the last 30 days estimates for fiscal 2011 has increased by 6 cents to $3.12 per share to account for upward revision by 10 analysts. Over the last 7 days, there has been no movement in estimates for the first quarter and fiscal 2011.
Earnings Surprise
Considering earnings surprises, the stock has not been steady over the last four quarters, with a mix of positive and negative surprises ranging between a low of -5.5% and a high of 4.0%. The average remained positive at 0.8%.
The upside potential for the estimate in the first quarter 2011, essentially a proxy for future earnings surprises, currently stands at 3.0%.
Our Recommendation
We have maintained our long-term ‘Neutral’ recommendation on Nordstrom. However, the company has a Zacks #2 Rank, implying a short-term ‘Buy’ rating on the stock.
Nordstrom is one of the leading players in the extremely fragmented specialty retail sector. The company offers a broad array of over 500 brands, targeted toward the entire family, through a strong nationwide network of 204 stores situated across 28 states. The company has a wide line-up of globally recognized brands, catering primarily to the upscale segment, enabling Nordstrom to generate high-margin revenue. Consequently, this gives the company a competitive edge and bolsters its well-established position in the market.
Moreover, the acquisition of online private sale leader HauteLook Inc. will help Nordstrom in building multi-channel retailing. The acquisition will facilitate the company to increase its direct business capabilities, implement enterprise-wide inventory management system, sell directly to online customers and enhance the company’s customer service.
However, consumer confidence and spending behavior may dampen due to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, high unemployment levels, and high household debt levels, which may negatively affect their disposable income and, in turn, the company’s growth and profitability.
Above all, Nordstrom operates in a highly fragmented specialty retail sector and faces intense competition from other well-established players, such as Gap Inc. (GPS), Limited Brands Inc. (LTD) and Abercrombie & Fitch Co. (ANF). The company primarily competes on the basis of fashion, quality and service. To retain the existing market share, the company may resort to aggressive pricing, which could affect its margins.
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