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Nordstrom, Inc. JWN reported better-than-expected third-quarter results, but analysts are mixed if this marks the start of a sustainable period of growth.

The Analysts

KeyBanc Capital Markets analyst Edward Yruma maintains an Overweight rating on Nordstrom's stock with a $48 price target.

Wedbush analyst Jen Redding maintains at Neutral, $36 price target.

Bank of America analyst Lorraine Hutchinson maintains at Underperform, $29 price target.

KeyBanc: Progress Shown

Nordstrom's third-quarter shows the company is once again seeing operational momentum, Yruma said. The company showed lower rates of markdowns in the off-price business along with higher sell-through of Anniversary products at full price.

Gross margins expanded by 110 basis points in the quarter and inventory was 2.8% from last year. Yruma said the off-price mix "showed more newness" and management is taking advantage of a "good opportunity" for opportunistic buys. Also, order pickup showed notable strength partly due to a shift back to performance marketing.

Wedbush: 'Impressive' Quarter

Redding said Nordstrom reported an "impressive" quarter, highlighted by less promotional activity and better than expected performance at Nordstrom Rack. Other encouraging metrics include a 34% growth in digital sales and retail gross margins beat expectations by 10 basis points at 34.

Nordstrom ended the quarter with a 2.7% decline in inventory, which makes the report "even more impressive" as many peers reported inventory builds in the quarter. A tighter inventory would better position the company to control markdowns over the holiday period.

Redding said the case for turning bullish can't be made until there is greater visibility into holiday sales, especially as competitors are very active in markdowns.

BofA: Unsustainable Momentum

Nordstrom showed a combination of operating margin expansion and gross margin expansion in the third quarter, Hutchinson said. Management's fourth-quarter guidance, however, calls for flat merchandise margin and occupancy deleverage as the New York City store comes online.

The guidance assumes some pressure from a promotional retail environment and is offset by heavy clearance activity last year, the analyst wrote in a note. The company is likely to show gross margins fall 25 basis points in the fourth quarter to 34.9% due to modestly higher than expected markdowns. As such, full-year gross margins are likely to end the year lower by 10 basis points and fall short of management's guidance of flat.

Price Action

Nordstrom's stock traded higher by 9% to $37.25 at the time of publication.