Nordstrom Misses Earnings Est - Analyst Blog
17 Maggio 2013 - 10:50AM
Zacks
Upscale department store operator, Nordstrom
Inc. (JWN) reported first-quarter fiscal 2013 earnings of
73 cents per share, missing the Zacks Consensus Estimate of 76
cents. However, quarterly earnings rose 4.3% from the year-ago
earnings of 70 cents per share.
The company’s earnings in the quarter came in line with the lower
end of its projected guidance as prudent inventory and expense
management compensated the loss due to lower-than-expected sales
volumes.
Total revenue
Nordstrom's same-store sales and top-line trends remained
encouraging during the quarter, driven by robust performance at the
company's stores. Though the company witnessed weaker sales trends
in seasonal merchandise and geographically in the Northeast,
Mid-Atlantic and Midwest regions during the first two months of the
quarter, sales trends recovered in April.
Total revenue rose 4.7% during the quarter to $2,749 million but
fell short of the Zacks Consensus Estimate of $2,813 million. Total
revenue for the quarter reflected a 4.8% increase in Net Retail
sales to $2,657 million and a 2.2% increase in Credit Card revenues
to $92 million.
Comps for the first quarter gained 2.7% on top of the year-ago
quarter, comprising flat comps in Nordstrom’s full-line stores, 25%
increase in Direct Sales comps and 0.8% increase in Nordstrom Rack
store comps.
Moreover, Nordstrom's comps (including full-line and direct
businesses) strengthened 3.1% during the quarter, driven by robust
performance in Cosmetics, Women’s Apparel and Handbags
categories.
Operational Update
Driven by increased occupancy costs related to the expansion of
Rack stores along with lower-than-expected sales volumes,
Nordstrom's gross profit margin at the retail segment contracted 50
basis points to 37.1% compared with 37.6% in the year-ago quarter.
Additionally, the company’s elevated expenses related to the
Fashion Rewards program that aims at enhancing customer relations
pulled down the gross margin.
Overall, the company reported gross margin of 39.1%, an increase of
60 basis points from 39.7% in the year-ago quarter.
Total selling, general and administrative expenses elevated 5.3% to
$801 million in the quarter. However, as a percentage of total
revenue, it contracted 15 basis points to 29.14% from the year-ago
quarter, mainly due to higher costs incurred for the company’s
venture in Canada and its accelerated Rack expansions. During the
quarter, the company also recorded a $10 million decrease in the
reserve for bad debt that was taken in the first quarter of the
year-ago period. Moreover, the company’s ongoing investments in
technology and e-Commerce to support online expansion added to its
burden.
Consequently, Nordstrom's operating income declined 1.8% to $275
million compared with $280 million reported in the prior-year
period, while operating margin contracted 60 bps to 10.0%.
Balance Sheet and Cash Flow
Nordstrom ended the quarter with cash and cash equivalents of
$1,190 million compared with $1,647 million at the end of the
year-ago quarter. Long-term debt as of May 4, 2013, stood at $3,119
million. During the first quarter, Nordstrom generated $161 million
in cash from operations.
Capital expenditures as of May 4, 2013 were $149 million. During
the quarter, the company bought back nearly 3.0 million shares for
about $166 million. Currently, the company has about $1.0 billion
remaining under its existing share repurchase authorization.
Guidance
Incorporating the first-quarter results, the company now expects
fiscal 2013 sales growth of about 4% –6%, compared to its previous
forecast of 4.5% – 6.5% growth. Similarly, the company lowered its
same store sales guidance for fiscal 2013 to range from 3% – 5%,
against 3.5% – 5.5% projected earlier.
However, the company has reiterated its fiscal 2013 earnings per
share forecast of $3.65 – $3.80 per share, excluding the impact of
future share repurchases. The current Zacks Consensus Estimate is
pegged at $3.80 per share.
Moreover, management continues to project selling, general and
administrative expenses, as a percentage of sales, to decline 10 to
30 basis points. Further, gross margin is expected to contract
between 10 bps and 30 bps year over year.
Our Take
We believe that this upscale department store chain will continue
to report better financial results in the near future. It is also
expected to continue attracting more shoppers with its various
sales channels and offers. Nordstrom currently has a Zacks Rank #3
(Hold).
Other stocks that are performing well in the retail-apparel/shoe
sector include Buckle Inc. (BKE), Foot
Locker Inc. (FL) and Gap Inc. (GPS), all
of which carry a Zacks Rank #2 (Buy).
BUCKLE INC (BKE): Free Stock Analysis Report
FOOT LOCKER INC (FL): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
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