We have retained our Neutral recommendation on
). The company's robust performance in the fourth quarter of
fiscal 2012, an encouraging forward outlook as well as the
ongoing initiatives to expand store base and boost top-lines are
favorable. However, the sluggish economic recovery, intense
competition and the company's exposure to seasonal fluctuations
keep us on the sidelines.
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Why the Reiteration?
Nordstrom operates as one of the leading players in the extremely
fragmented specialty retail sector, offering a broad array of
over 500 brands, targeted toward the whole family, through a
strong nationwide network of more than 240 stores situated across
Robust same-store sales and top-line trends as well as effective
cost management helped this Zacks Rank #3 (Hold) stock gain 26.1%
in the fourth quarter of fiscal 2012, reporting earnings of $1.40
per share. Quarterly earnings also beat the Zacks Consensus
Estimate of $1.34. Moreover, robust performance at the company's
stores as well as the inclusion of an additional week in fiscal
year 2012 helped expand the company's top line by over 13.3% to
$3,702 million, beating the Zacks Consensus Estimate of $3,686
Strong performance prompted management to provide a promising
outlook for fiscal 2013. Management forecasted fiscal 2013
earnings per share excluding the impact of future share
repurchases, in the range of $3.65-$3.80 per share, based on
estimated sales growth of 4.5% to 6.5%.
Moreover, we believe the company's sustained focus on expanding
its store network along with enhancing online sales and consumer
retention strategies will boost its top line and profitability.
In the years ahead, the company targets to double the number of
Rack stores to more than 230 over the next 4 years, with roughly
24 openings in 2013 and more than 30 in 2014.
Further, the company has actively implemented strategies to
improve its merchandise offerings, develop IT infrastructure to
enhance customer's web and mobile experience, implement an
enterprise-wide inventory management system as well as increase
its significance among existing and new customers.
However, we remain slightly cautious on the company's growth
prospects due to sluggish economic recovery, intense competition
from other established players and exposure to seasonal
Other Stocks to Consider
Other stocks that are performing well in the retail-apparel/shoe
), which has a Zacks Rank #1 (Strong Buy),
New York & Co. Inc.
), both of which have a Zacks Rank #2 (Buy).