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Nordstrom Inc JWN

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Narrow-Moat Nordstrom’s Progress Continued in Q2 Despite Some Challenges; Shares Fairly Valued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

Nordstrom beat our 2021 second-quarter sales and earnings expectations and provided a full-year outlook above our expectations. Against an easy comparison, its quarterly sales growth of 101% eclipsed our 83% forecast. However, its sales were still down about 6% as compared with 2019’s second quarter (some negative impact from Anniversary Sale timing). Nordstrom’s operating margin also outperformed our estimate (4.2% versus 3.0%) but conspicuously paled in comparison to the double-digit operating margins recently reported by no-moat department store operators Macy’s and Kohl’s. Nordstrom’s share price slid by about 8% in post-market trading, possibly because of concerns over cost pressures and the rate of sales recovery.  We expect to lift our per share fair value estimate on the firm of $33.50 by a low-single-digit percentage but view its shares as fully valued.

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Company Profile

Business Description

Nordstrom is a fashion retailer that operates approximately 100 department stores in the U.S. and Canada and approximately 250 off-price Nordstrom Rack stores. The company also operates both full- and off-price e-commerce sites. Nordstrom’s largest merchandise categories are women’s apparel (29% of 2020 sales), shoes (26% of 2020 sales), and women’s accessories (14% of 2020 sales). Nordstrom, which traces its history to a shoe store opened in Seattle in 1901, continues to be partially owned and managed by members of the Nordstrom family.

Contact
1617 Sixth Avenue
Seattle, WA, 98101
T +1 206 628-2111
Sector Consumer Cyclical
Industry Department Stores
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Distressed
Employees 62,000

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