As the curtain falls on the gift-giving season, the analysts are keeping a close watch on the final same-store sales figures to be released by the retailers. As per Thomson Reuters, aggregated same-store sales are expected to grow by 4.3% in December 2011 and Nordstrom Inc. (JWN) is expected to be one of the top gainers.
Nordstrom has performed extremely well during the busiest shopping season of the year. Adding to the company’s delight are its strong Black Friday sales.
Strong Fundamentals
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 whole family, through a strong nationwide network of 225 stores situated across 30 states. Moreover, Nordstrom has a strong line-up of globally recognized brands, catering primarily to the upscale segment, enabling Nordstrom to generate high margin revenue. Consequently, this provides a competitive advantage to the company and bolsters its well-established position in the market.
Further, Nordstrom’s recently acquired online private sale leader HauteLook Inc. has helped the company in building its multi-channel retail format. The acquisition facilitated Nordstrom to increase its direct business capabilities, implement an enterprise-wide inventory management system, direct sales to online customers while boosting customer service.
Perhaps, a Year to Remember
Since the beginning of fiscal 2011, i.e., February 2011, Nordstrom reported a growth in comparable sales every month. As of November 2011, the company reported an increase of 7.1% in comparable sales as opposed to an increase of 8.2% during the same period in fiscal 2010. Nordstrom’s net sales increased 12.7% year over year to $8.24 billion as of November end.
During the first three quarters of fiscal 2011, the company’s rising comparable sales positively influenced its performance. Comparable sales in first quarter increased 6.5%, resulting in a rise of approximately 33% in earnings per share. During the second quarter, Nordstrom’s earnings per share increased approximately 21.2%, primarily on a 7.3% rise in comparable sales. The third quarter was also a happy tale, as comparable sales rose 7.9%, boosting earnings per share by 11.3%.
Nordstrom has fared better than its peers for whom the year was not quite this cheerful. Gap Inc. (GPS), which competes with Nordstrom, has reported a decline in comparable sales so far in every month during its ongoing fiscal 2011 (ending January 2012), with April and June as exceptions. Till November 2011, Gap reported a decline of 3% in comparable sales compared with an increase of 3% during the same period in fiscal 2010. Accordingly, Gap’s net sales declined 1% year over year to $11.73 billion as of the same timeframe.
Yet another peer of Nordstrom, J. C. Penney Company Inc. (JCP) also recorded an average growth of a meager 0.8% in comparable store sales in the first 10 months of fiscal 2011, ending January 2012. The company’s net sales declined 2.4% from February through November.
Conclusion
We believe that Nordstrom’s strategic move of expanding its store counts and direct sales to online customers will give a boost to its top line.
Nordstrom is going to release its December 2011 comparable store sales data on January 5, 2012. The company is expecting a growth of 6% in comparable sales during fiscal 2011.
Nordstrom, currently, holds a Zacks #3 Rank, implying a short-term ‘Hold’ rating on the stock. Besides, the company retains a long-term ‘Neutral’ recommendation on the stock.
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