) hit a 52-week high of $64.19 on April 3, 2014, before closing
the session at $63.37. The company's better-than-expected fourth
quarter fiscal 2013 results and a 10% dividend hike have made
investors upbeat on the stock. Moreover, the stock currently
trades at a discount to the industry average based on forward
earnings estimate, which provides further upside potential.
However, the primary question here is to whether the stock will
be able to sustain this momentum given the meager 2.3% growth
witnessed since the start of 2014.
The sustainability of this momentum also looks apparently
difficult given the company's tempered outlook for fiscal 2014.
The company's projections for fiscal 2014 reflect higher costs
across the board due to the ongoing infrastructure investments
and pre-opening costs related to its Canadian venture along with
its Rack store expansion plans. This cost inflation is further
expected to impact earnings throughout fiscal 2014.
Higher costs projections for the year reflect SG&A expenses,
as a percentage of sales, to rise 10 to 30 bps. Additionally, the
company estimates the Canadian venture along with its expansion
plans for Rack stores will raise depreciation and rent expenses
in fiscal 2014.
As a result, the company projects depreciation and
amortization of nearly $514 million in fiscal 2014, representing
13% growth from the fiscal 2013 level. Rent expenses for fiscal
2014 are expected to rise 17% from the fiscal 2013 level to $147
ABERCROMBIE (ANF): Free Stock Analysis Report
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NORDSTROM INC (JWN): Free Stock Analysis
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As a result, Nordstrom expects fiscal 2014 earnings to come in
the range of $3.75-$3.90 per share, assuming shares outstanding
of nearly 196 million. Moreover, the company anticipates loss
before interest and taxes of $35 million for Canada in fiscal
2014 compared with a loss of $14 million incurred in fiscal 2013.
This weak outlook has triggered a downward trend in the Zacks
Consensus Estimate for fiscal 2014 and 2015. Estimate for fiscal
2014 have gone down 5.9% to $3.86 per share whereas for fiscal
2015 it has declined 8.3% to $4.20 per share, over the last 60
days. Moreover, Nordstrom's long-term expected earnings per share
growth of 10.2% is lower than the industry average of 14.7%.
Moreover, sluggish macroeconomic backdrop and seasonality of
business are other significant challenges. Moreover, it faces
stiff competition from players like
The Gap, Inc.
Abercrombie & Fitch Co.
), which can dent its top line as well margins.
The above-mentioned factors currently keep the company at a Zacks
Rank #4 (Sell). Another better ranked retail stock which can be
considered for investment includes
Foot Locker, Inc.
) that carries a Zacks Rank#2 (Buy).