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Nordstrom (JWN) Posts Weak Holiday Sales, Cuts FY22 View

Nordstrom, Inc. JWN announced dismal holiday sales results. The company’s sales declined 3.5% year over year in the nine-week period ended Dec 31, 2022. Banner-wise, Nordstrom sales fell 1.7% and sales at Nordstrom Rack decreased 7.6%.

This was mainly due to high promotions and sluggish sales compared with the pre-pandemic levels. Reduced consumer spending, stemming from the tough macroeconomic environment, acted as a headwind.

In order to end fiscal 2022 with healthy inventory levels, Nordstrom undertook additional markdowns. As a result, it expects year-end inventory levels to decline in the double-digits year over year.

Driven by these factors, management lowered its fiscal 2022 guidance. The company anticipates revenue growth, including retail sales and credit card revenues, at the lower end of the prior mentioned 5-7%. The EBIT margin is expected to be 2.8-3.1%, down from the earlier stated 4.1-4.4%. This indicates lower-than-expected gross margins due to additional markdowns. The adjusted EBIT margin is forecast to be 3.1-3.3% compared with the prior mentioned 4.3-4.7%. SG&A expenses are expected to reflect gains from the company's supply-chain optimization initiatives and ongoing cost-saving efforts.

Adjusted earnings are likely to be $1.5-$1.7, down from the previously communicated $2.3-$2.6. Reported EPS is predicted to be $1.33-$1.53, which indicates a decline from the last mentioned $2.13-$2.43. The tax rate is expected to be 17%. Meanwhile, the leverage ratio is likely to be slightly above 3.0 times by the year end compared with the prior view of below 2.9 times.

Consequently, shares of JWN have declined 10.1% in the past three months against the industry’s growth of 26.4%.

 

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Zacks Investment Research


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That said, this Zacks Rank #3 (Hold) company is committed to enhancing customer experience via its Closer to You strategy, optimized supply chain and better efficiency. Such endeavors are expected to deliver significant benefits in 2023. Also, it noted that fiscal 2023 started on a solid note, driven by clean inventory levels.

Stocks to Consider

Here are three better-ranked stocks to consider — Capri Holdings CPRI, Tecnoglass TGLS and Ulta Beauty ULTA.

Capri Holdings, which operates membership warehouses, presently sports a Zacks Rank #1 (Strong Buy). CPRI has an expected EPS growth rate of 11.8% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Capri Holdings’ sales and EPS for the current financial year suggests respective growth of 1% and 10.6% from the year-ago period’s reported figures. The company has a trailing four-quarter earnings surprise of 20.99%, on average.

Tecnoglass, the producer and seller of architectural systems for the commercial and residential construction industries, currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Tecnoglass’ current financial-year revenues and EPS suggests growth of 43.4% and 82.2%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter negative earnings surprise of 26.9%, on average.

Ulta Beauty currently carries a Zacks Rank #2. The expected EPS growth rate for the company for three to five years is 13.8%.

The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 15.7% from the year-ago period’s reported number. The beauty retailer and the premier beauty destination for cosmetics, fragrance, skincare products, hair care products and salon services has a trailing four-quarter earnings surprise of 26.2%, on average.

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Nordstrom, Inc. (JWN) : Free Stock Analysis Report

Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report

Tecnoglass Inc. (TGLS) : Free Stock Analysis Report

Capri Holdings Limited (CPRI) : Free Stock Analysis Report

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Zacks Investment Research