Nordstrom Beats on Q3 Earnings, Narrows FY19 EPS View

Nordstrom Beats on Q3 Earnings, Narrows FY19 EPS View
November 25, 2019

 

The shares of Nordstrom Inc (NYSE: JWN) rose 10.58% or $3.63 to close at $37.95 after the luxury department store chain reported FY 2019 third-quarter earnings that exceeded analysts’ estimates. The company also narrowed its 2019 earnings outlook. The stock has depreciated by nearly 26% so far this year.

Seattle-based Nordstrom posted third-quarter revenues of $3.67 billion, down 2.2% from $3.75 billion in the similar period last year. The reported revenues were in line with analysts’ estimates.

For the quarter ended November 2nd, net income increased to $126 million, or $0.81 a share, from $67 million, or $0.39 per share, last year. Analysts polled by Refinitiv anticipated Nordstrom to post earnings of $0.64 per share.

Commenting on the third-quarter earnings, Erik Nordstrom, co-president of Nordstrom, pointed out that the company’s strategy is yielding the desired results. “Our third-quarter earnings exceeded expectations, demonstrating substantial progress in the delivery of our strategy and strength of our operating discipline. Through our customer focus, we drove broad-based improvement in top-line trends. The consistent strength of our inventory and expense execution contributed to increased profitability for the quarter.”

Digital sales accounted for 34% of Nordstrom’s total sales, from 31% in the comparable quarter of 2018. Almost 50% of digital sales were driven by in-store pickup, according to Erik Nordstrom. Specifically, in-store pick up represented for approximately two-thirds of digital transactions in Los Angeles.

Segment-wise,

  • The full-price division posted revenues of $2.270 billion, down 4.1% on a y-o-y basis.
  • The off-price division reported revenues of $1.296 billion in the recent quarter, an increase of 1.2% from $1.281 billion in the corresponding quarter of 2018.

The company ended the quarter with 381 stores (full-price plus off-price), compared with 380 on November 3rd, 2018. In October, Nordstrom opened its women’s store in New York. The sales generated by the store will likely be accounted for only in the fourth quarter. The New York store, focused on women, saw 85,000 visits in the first weekend. Nordstrom stated that robust sales in men’s only store exceeded its projections.

Erik Nordstrom, Inc, elaborated on the initiatives taken by the company to improve business. “Our market strategy is transforming our business model in how we’re serving customers. We have a unique mix of assets – Full-Price, Off-Price, stores, and online – and we are further linking our businesses to serve customers in new and differentiated ways. We achieved an important milestone with the opening of our New York City flagship store, significantly increasing our presence in the world’s top retail market. It’s a culmination of efforts across many teams, and we are grateful for their dedication and passion in bringing this store to life.”

Despite the weakness in the full-price business, Nordstrom reaffirmed its FY  2019 sales view, which calls for a 2% decline on y-o-y basis. The company also narrowed its earnings forecast to a range of $3.30 to $3.50 per share for FY 2019. Earlier, the company had forecast the lower end of the range to be $3.25 per share.

In the last week of October, the company’s board rejected a proposal from co-presidents Pete and Erik Nordstrom expressing their interest in increasing their stake in the enterprise.

The quarterly beat, reaffirmation of FY 2019 sales view and narrowing of full-year 2019 earnings outlook is anticipated to keep the stock bullish in the short-term.

The price chart indicates that the stock closed above its 50-day moving average. Furthermore, the Chaikin money flow indicator is also in the positive region. Therefore, we are anticipating the stock to rally in the short-term.

jwn - technical analysis - 25th Nov 2019

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Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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