Nordstrom, Inc. (NYSE: JWN) plans to report its third quarter 2013 financial results after the close of the financial markets on Thursday, Nov. 14, 2013. The announcement will be followed by a conference call at 4:45 p.m. Eastern Standard Time.
Nordstrom is one of the leading fashion specialty retailers based in the U.S. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 257 stores in 35 states, including 117 full-line stores, 137 Nordstrom Racks, two Jeffrey boutiques, and one clearance store.
Wall Street expects Nordstrom to earn 66 cents a share, according to analysts polled by Thomson Reuters. The consensus estimate implies a 7 percent drop from last year when it earned 71 cents a share.
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Nordstrom EPS results have managed to top the street's view twice in the preceding four quarters while missing in the remaining two periods. Analysts have become bearish on earnings prospects of Nordstrom as the consensus estimate dropped by 8 cents (11 percent) in the past three months. However, one analyst raised the profit estimate in the last month.
Quarterly revenues are projected to rise 2.3 percent to $2.87 billion from $2.81 billion in the same quarter last year.
Despite a soft retail environment, Nordstrom remains a "best-in-class" retailer, sector-best same store sales historically in the mid single digits (MSD) and solid improvements in square feet and strong online contributions (including the now profitable Hautelook).
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"For 3Q, we are modeling EPS of $0.63, below Street consensus of $0.66. We expect revenue growth of 3.1% to $2.9 billion (including $94 million from Credit)," Deutsche Bank analyst Paul Trussell wrote in a note to clients.
Same store sales is the key retail indicator and should be the focus point for investors. Total company same-store sales for the second quarter increased ! 4.4 percent on top of last year's same-store sales increase of 4.5 percent.
Sales trends throughout the second quarter showed moderate improvement relative to the first two months of the year but remained softer than anticipated. The impact of this was mitigated by disciplined execution of inventory and expenses, including a reduction in variable expenses associated with company performance.
The Anniversary Sale, which historically is the company's largest sale event of the year, occurred in the second quarter, while in fiscal 2012, it overlapped the second and third quarters. This event shift resulted in a favorable comparison for the second quarter, but the same may prove to be unfavorable comparison in the third quarter.
As a result, the company's inventory position and gross margin numbers would be the key for the company to post decent results.
"While the sales shortfall in 1H13 was undoubtedly disappointing, we take comfort in (1) the more cyclical categories such as women's apparel and shoes are producing consistent trends, (2) Rack SSS stood at 10.2% on a 2-year stack in 2Q; (3) inventory growth was below that of sales in 2Q (5.0% vs. 6.4% top-line)," Trussell said.
Meanwhile, guidance for the fourth quarter is now potentially conservative as Nordstrom used the Anniversary sale trends (occurred during latter weeks in July when retail softened) to provide second half same store sales (SSS) guidance.
Investors will want an update for management's fiscal 2013 outlook. The company currently predicts fiscal 2013 EPS of $3.60-$3.70. In addition, it sees full year sales growth of 3-4 percent and SSS of 2 - 3 percent, with the third quarter's SSS projected below this level.
Looking back, the ongoing investments and the lack of flow-through put the stock in the penalty box, but interestingly many investors have come around to adopting management's long-term approach. What's still missing to move the stock higher is a return to MSD plus SSS trends, which while not! in the c! ards this second half, could be in play in fiscal 2014.
For the second quarter, Seattle, Washington-based Nordstrom's profit improved to $184 million or 93 cents a share from $156 million or 75 cents a share last year. Total revenues for the quarter grew to $3.20 billion from $3.01 billion the prior year.
"If consumer interest in Apparel & Accessories rebounds, JWN is best-positioned amongst its peers, in our view, especially given easier compares in 4Q," Trussell added.
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