Digital sales spike helps Nordstrom (NYSE:JWN) to Q3 beats

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Updated: 25 November 2019

 

  • Retailer posts $0.81 EPS and $3.672bn revenue
  • Follows up with $3.30–$3.50 profit outlook for FY2020
  • Doesn’t expect China tariffs to impact earnings
  • Shares rise 8% in trading, still down 20% since 1stJanuary

 

Nordstrom Inc. (NYSE:JWN) shares advanced 8% in Friday’s trading after the luxury department store chain delivered earnings and revenue beats in Q3 and analysts praised its recent pivot to digital shopping experiences.

Before Wall Street’s final session of the week got underway, Nordstrom posted $0.81 per share earnings for the three months to 2nd November, $0.17 better than pre-report forecasts.

Group revenues for the same period did fall 2% year-over-year, but the $3.672bn total was enough to beat the analyst consensus by $10m.

There was more good news for investors as Nordstrom noted that new tariffs imposed on China-made imports are unlikely to hit earnings in FY 2020, raised its profit guidance to $3.30–$3.50 and offered a wider EBIT margin forecast.

Co-president Erik Nordstrom struck a bullish tone in a conference call late last week as he spoke of “substantial progress” for its core strategy and the robustness of its operating discipline.

He added: “Through our customer focus, we drove broad base improvement in top line trend of more than 200 basis points relative to the first half of the year.”

Black Friday has traditionally been the busiest day for retail in the US for more than a decade and Nordstrom is confident of being a prime ‘gifting destination’ for its customers on the big day this year (29th November).

Nordstrom has also followed rival Target’s (NYSE:TGT) lead on blurring the lines between online and physical store shopping and its recent investment in digital is paying off as sales in this area climbed 7% year-over-year in Q3 and accounted for around 33% of all revenues.

One sore spot in the report was the 4.1% drop off full-price sales, but analysts brushed over that on Friday as they lined up to offer rating and price target upgrades.

Evercore ISI, setting an Outperform rating and $50 PT, said investors will now see Nordstrom as the department store digital leader and believes retail is in a good place after Target also had a strong quarter.

Cowen analyst Oliver Chen, standing pat at Outperform and adding $2 to a higher $37 PT, said the firm was encouraged by progress in Nordstrom’s Off Price business, which came in with positive sales growth and improved profitability.

He added: “continued inventory discipline resulted in fewer markdowns, and an eighth consecutive quarter of improved inventory turns, which drove improved segment profitability.”

The stronger-than-anticipated report and positive notes from analysts paved the way for stock gains on Friday.

Nordstrom was fast out of the gate, rising 8% early in the morning and it held steady thereafter as it reduced its year-to-date decline to 20%. Shares were valued at $37.13.