Nordstrom Inc. (JWN) 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.

For fiscal 2010, earnings per share came in at $2.75 per share, up 36.8% year over year and ahead of the Zacks Consensus Estimate of $2.71 per share.

Quarterly Details

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.

During the quarter, Multi-channel same-store sales jumped 7.2%, driven by the Jewelry, Dresses and Women’s Shoes categories. Full-line same-store sales growth was driven by strong performances in the Midwest and the South. Nordstrom Rack same-store sales increased by 3.9%. The company expects same-store sales to grow in the range of 2% to 4% in fiscal 2011.

Improved merchandise margin coupled with lower buying and occupancy costs led to a 34 basis point (bps) year-over-year expansion in gross margin to 39.7% in the quarter. Conversely, retail selling as well as general and administrative expenses increased $66 million to $697 million in the quarter, primarily due to increased marketing and technology expenses as well as higher volume of sales. However, credit selling, general and administrative expenses fell 48.1% year over year to $55 million.  The company expects 2011 gross margin to range from down-to-up 10 basis points.

Consequently, Nordstrom’s operating income posted an increase of $96 million year over year to $406 million, while operating margin expanded 210 bps to 13.9%.

Balance Sheet and Cash Flow

Nordstrom ended the quarter with a cash hoard of $1,506 million, compared with $795 million in the year-ago quarter. Long-term debt (including current portion) at the end of the quarter stood at $2,781 million. Nordstrom generated $1,177 million of cash from operations, received $498 million from borrowings, and utilized $356 million for debt repayment and $399 million for capital expenditure.

In fiscal 2011, the company expects to incur capital expenditure in the range of $400 million to $440 million.

Store Update

During the fourth quarter of fiscal 2010, Nordstrom opened a Rack store at Arrowhead Crossing in Peoria, Arizona.

Guidance

The company sees fiscal 2011 earnings per share in the range of $2.95 to $3.10.

Nordstrom currently has a short-term Zacks #3 Rank (‘Hold’) rating. We retain our long-term Neutral recommendation on the company.

Based in Seattle, Washington, Nordstrom Inc. is a leading fashion specialty retailer in the U.S., offering high quality apparel, shoes, cosmetics and accessories for men, women and kids. The company offers both branded and private label merchandise, as well as a private label card, two Nordstrom VISA credit cards and debit cards for Nordstrom purchases

The company operates in a highly fragmented specialty retail sector and faces intense competition from other well-established players, such as Gap Inc. ( “>GPS) and Abercrombie & Fitch (ANF).

 
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