Nordstrom Stock Up 18.5% On Solid Omni-Channel Endeavors
Zacks Investment Research | Dec 10, 2019 05:08AM ET
Shares of Nordstrom, Inc. (NYSE:JWN) have gained 18.5% in the past six months, thanks to its robust omni-channel efforts including store and e-commerce expansion. Additionally, the company’s significant progress on the customer-based strategy, which focuses on three strategic factors — leveraging the company’s brand strength, providing excellent services and offering compelling products to its customers — bode well.
We note that theVGM Score of B and an expected long-term earnings growth rate of 6%.
Delving Deeper
Nordstrom’s omni-channel endeavors are focused on advancing in the technology space by boosting e-commerce and digital networks, and improving its supply-chain channels and marketing efforts. In third-quarter fiscal 2019, digital sales advanced 7%, representing 34% of its net sales, up 300 basis points (bps) year over year.
The company has been expanding its loyalty program, as well. Evidently, the Nordy Club had about 12 million active customers at the end of the fiscal third quarter. This represented 13% growth year over year and 65% of quarterly sales.
On the store front, Nordstrom has been consistently focusing on expanding footprint, which should help grow market share and boost the top line. Furthermore, the company remains keen on prioritizing its investments in the top North American markets apart from continued expansion in Canada. Overall, the company envisions a $1 billion sales opportunity from its expansion in Canada by 2020, including six planned full-line stores and 15 Rack stores.
Meanwhile, Nordstrom’s domestic store expansion efforts have led to expand footprint in to New York, San Francisco, Chicago and Dallas to offer products with same-day pickup or next-day delivery options. Further, it has been receiving strong customer response for its NYC flagship store. Opening of this NYC flagship store has aided the company to achieve an important milestone, and considerably fortify its presence in the world's top retail market.
However, increased cost of investments toward occupancy, technology, store openings, supply chain and marketing are resulting in higher expenses. Moreover, higher spending toward expansion of its market strategy in different markets might result in higher costs and, in turn, weigh on margins and profits.
Nevertheless, the company has been progressing well on its cost-saving initiatives. Apparently, the company accomplished $170 million in cost savings and remains ahead of its plans to realize nearly $150-$200 million in fiscal 2019.
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We believe all the aforesaid efforts will help Nordstrom deliver sustainable growth over the long term.
Q3 Highlights
Nordstrom delivered impressive third-quarter fiscal 2019 results, wherein the top and bottom lines outshined the Zacks Consensus Estimate. Notably, earnings marked second consecutive beat, sales reverted to positive after three straight quarters of miss. Moreover, its bottom line improved 20.9%, backed by effective inventory management and robust cost-containment efforts.
The company also witnessed improved top-line trends in its full-price and off-price businesses, thanks to solid gains from loyalty program, digital channel and merchandise assortment.
Notably, its off-price division delivered improved inventory turns for the eighth straight quarter. As a result, management raised the lower end of its earnings per share view to $3.30-$3.50 for fiscal 2019. The Zacks Consensus Estimate for fiscal 2019 earnings of $3.41 climbed nearly 3% over the past 30 days.
Key Picks in the Same Space
Boot Barn Holdings, Inc. (NYSE:BOOT) has an impressive long-term earnings growth rate of 17%. It currently sports a Zacks Rank #1 (Strong Buy). You can see Zacks Investment Research
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