Don’t Get Caught With this Department Store in Your Portfolio

Photo Credit: Mike Mozart

Nordstrom Inc (JWN) Consumer Discretionary - Multiline Retail | Reports August 11, After Market Closes

Key Takeaways

• The Estimize consensus is looking for earnings per share of 55 cents on $3.65 billion in revenue, right in line with Wall Street on the top and bottom line
• Nordstrom, along with Macy’s, is one of the most beaten down department stores with shares falling 40% in the past 12 months
• Its off price business and online platform have been the two fastest growing segments
• What are you expecting for JWN? 

Department stores are losing favor with consumers thanks to the rise of fast fashion trends and online retailers. This has came largely to the dismay of iconic brands in Macy’s and Nordstrom's. Both companies have reported dismal earnings in the past few quarters with zero indication of turning things around. Even with the bar set extremely low, today’s report from Nordstrom isn’t expected to wow investors.

The Estimize consensus is calling for earnings per share of 55 cents, down 38% from the same period last year. That estimate has declined 35% since Nordstrom’s most recent report in May. Revenue is anticipated to drop 1% to $3.65 billion, extending its streak of negative growth. Shares are down 10% year to date and a resounding 40% in the past 12 months. On average investors should expect to see a 3% drop immediately following Nordstroms report.

Nordstrom has been delivering weaker than expected results for some time. Those who can afford the top notch brands are now shopping directly from the vendor while other consumers are opting for off-price retailers. This has clearly been the case for Nordstrom which saw gross profit as a percentage of net sales decline 35% compared with same period last year.

Its off price business and online sales were the two fastest growing segments within the company. Nordstrom Rack and Hautelook saw net sales increase 50% while online sales increased 11%. Management has also indicated that its recent anniversary sale had a considerable impact on traffic. While a number of these initiatives are taking off, investor’s will be keen to hear how Nordstrom guides future quarters before making any broader conclusions.