Categories Analysis, Retail

Nordstrom (JWN) looks poised to emerge stronger from pandemic. Here’s why

The company is scheduled to unveil its first-quarter numbers on June 1 after the normal trading hours

The COVID crisis is having a mixed impact on the retail sector — conventional store operators struggle to stay afloat while e-commerce platforms thrive on the shopping boom. Luxury store operator Nordstrom Inc. (NYSE: JWN) is currently getting back on track after reporting negative earnings last year.

Like most consumer discretionary businesses, Nordstrom’s future performance would depend on how the pandemic situation emerges. It is expected that the company’s brand power and impressive customer service would help it navigate through the crisis.

Resilience

The Seattle, Washington-based department store chain has managed to withstand the slowdown to a large extent, unlike peers like Macy’s, Inc. (NYSE: M) and J.C. Penney (NYSE: JPC) which were forced to close dozens of stores amid weak customer traffic. When it comes to investing in JWN, adopting a wait-and-watch policy now will pay off, given the risks to the business from volatile demand conditions. But the stock, which doesn’t seem to have much room to grow this year, looks fairly valued.


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Of late, Nordstrom has been facing the issue of excess inventory due to shipment delays during the holiday season, which the management expects to fix by the early second half. There is a continued uptrend in e-commerce sales, the share is which is seen growing to 50% this year. On the flip side, if the problem persists the company might not be able to maintain proper stock even when customers return to stores after the market reopens.

Online Sales up

In the final three months of FY20, earnings plunged to $0.21 per share from $1.23 per share a year earlier. The bottom line was hit by a 20% drop in revenues to $3.65 billion. The numbers, however, exceeded Wall Street’s expectations aided by solid online sales, bringing some relief to the stakeholders.

We’re increasing our connections with customers by strengthening our digital capabilities to offer them discovery and inspiration. Remote selling options, such as looks created by our salespeople using style boards, are resulting in outsized customer satisfaction scores, conversion and average transaction size. And we know that when customers engage with us through order pickup, alterations or styling, their overall spend increases by up to five times. During the fourth quarter, we saw a significant improvement in customer acquisition trends, improving sequentially by roughly 15 percentage points from the prior quarter.

Erik Nordstrom, chief executive officer of Nordstrom

Q1 Earnings

The company is scheduled to unveil its first-quarter numbers on June 1 after the normal trading hours. The market expects a wider loss of $0.64 per share on revenues of $2.84 billion, which represents an 18% annual increase.


Read management/analysts’ comments on quarterly reports


Nordstrom’s shares are trading sharply below the record they set in early 2015, but well above the 52-week average. The stock closed the last trading session lower, after more than doubling the value in the past twelve months.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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