Upscale department store operator,
) reported second-quarter fiscal 2013 earnings of 93 cents per
share, outpacing the Zacks Consensus Estimate of 88 cents and
surging 24.0% from 75 cents earned in the year-ago quarter. The
growth was buoyed by improving sales trend along with prudent
inventory management and cost containment efforts.
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Though Nordstrom witnessed moderate improvement in sales trend
during the quarter, it remained below expectations.
Total revenue rose 6.3% year over year to $3,196 million but fell
short of the Zacks Consensus Estimate of $3,302 million. Total
revenue reflected a 6.4% year-over-year increase in Net Retail
sales to $3,104 million and a 4.5% increase in Credit Card
revenues to $92 million.
Total comps increased 4.4% during the quarter against a gain of
4.5% in the year-ago quarter. The company registered 0.7% decline
at its full-line stores, while comps at Nordstrom Rack jumped
2.4%. The company's direct sales soared 37%, whereas Nordstrom
Rack net sales rose 12%.
Moreover, Nordstrom's comps (including full-line and direct
businesses) shot up 4.2% during the quarter, driven by robust
performances at Men's Shoes and Apparel, and Kids' Attire.
Driven by increased costs related to expansion of the Fashion
Rewards customer loyalty program, Nordstrom's gross profit margin
as a percentage of net sales at the retail segment contracted 13
basis points (bps) to 35.5%.
Total selling, general and administrative (SG&A) expenses
inched up 2.4% to $857 million in the quarter.
Nordstrom's operating income increased nearly 15.5% to $335
million compared with $290 million reported in the prior-year
period, while operating margin as a percentage of net sales
expanded 90 bps to 10.8%.
Balance Sheet and Cash Flow
Nordstrom ended the quarter with cash and cash equivalents of
$1,128 million compared with $1,258 million at the end of the
year-ago quarter. Long-term debt was $2,715 million versus $3,133
million in the prior-year period. During the fiscal first half of
2013, Nordstrom generated $547 million in cash from operations.
Capital expenditures for six months ended as of Aug 3, 2013 were
$427 million. During the quarter, the company bought back nearly
0.8 million shares for about $48 million. Currently, Nordstrom
has about $979 million worth of shares remaining under its
existing share repurchase authorization.
Nordstrom declared plans to launch 14 new Rack stores and
relocate 2 Rack stores and 1 full-line store during the rest of
2013. During the quarter, the company opened 3 Rack stores. At
the end of the quarter, number of stores was 248 as against 231
at the end of the prior year quarter.
Considering the second-quarter results, Nordstrom lowered its
fiscal 2013 sales growth to about 3.0%-4.0%, down from the
previous forecast of 4.0%-6.0%. The company also lowered its
comparable-store sales guidance for fiscal 2013 to 2.0%-3.0% from
3.0%-5.0% projected earlier.
Management now expects interest expenses to decline in the range
of $5-$10 million, against the previously guided figure of $5
Further, the company lowered its fiscal 2013 earnings forecast to
$3.60-$3.70 per share as compared with the earlier guidance of
$3.65???$3.80. The current Zacks Consensus Estimate is pegged at
$3.78 per share.
However, management projects SG&A expenses, as a percentage
of sales, to rise 0 to 10 bps, against the earlier guidance of 0
to10 bps decline. Further, gross margin is expected to contract
30-40 bps year over year compared with the prior outlook of 10-30
Management expects tax rate to fall to 38.6% compared with the
earlier guidance of 39.0%.
Nordstrom currently carries a Zacks Rank #3 (Hold).Other stocks
that are performing well in the retail-apparel/shoe sector
Citi Trends, Inc.
). All of them carry a Zacks Rank #2 (Buy).