On Wednesday, Guggenheim maintained its Neutral rating on Nordstrom (NYSE: JWN) following the company's third-quarter earnings report, which surpassed analyst expectations. Nordstrom's adjusted diluted earnings per share (EPS) for the third quarter of 2024 were reported at $0.33, exceeding Guggenheim's estimate of $0.20. The retailer also reported net sales of $3.35 billion, topping the forecasted $3.23 billion.
This marked the fourth consecutive quarter of top-line growth for Nordstrom, with both its Nordstrom and Rack brands achieving a 4% comparable store sales increase in the third quarter. The company's digital business continued its upward trajectory, recording a 6.4% growth. This is the sixth straight quarter of sequential improvement, attributed to enhanced search and discovery features and a broader online assortment, particularly for items priced under $100.
Nordstrom's management highlighted strong performance in categories such as Women's and Men's Apparel, Active, and Shoes. The company's gross margin expanded by 60 basis points to 35.6%, which was higher than Guggenheim's estimate of 35.4%. Despite this positive performance, inventory levels rose by 5.9%, slightly outpacing sales, which could be a concern as the holiday season approaches.
The firm has cautiously increased its full-year 2025 and 2026 EPS estimates for Nordstrom to $2.00 and $2.10, up from the previous $1.90 and $2.00 estimates, respectively. The adjustment reflects the observed sales trends, which showed a notable decline towards the end of October. While acknowledging signs of stabilization in Nordstrom's business, Guggenheim's Neutral stance remains unchanged due to the potential areas for improvement, such as operational optimization and further development of momentum at both the Rack and Nordstrom brands.
In other recent news, Nordstrom, Inc. (NYSE:JWN) has reported favorable Q3 2024 results, with net sales surpassing $3.3 billion, marking a 4.6% increase from the previous year. Comparable and digital sales also saw a rise of 4% and 6.4% respectively. Despite the strong quarter, Nordstrom has revised its full-year guidance to flat to 1% revenue growth due to potential challenges in the upcoming fourth quarter.
Evercore ISI maintained its "In Line" rating for the retail company's stock, but adjusted its price target to $22.00 from the previous $20.00, reflecting the company's recent earnings report. In contrast, UBS maintained its Sell rating on Nordstrom stock, but increased the price target from $13.00 to $14.50, expressing concerns about the company's potential loss of market share to off-price retailers and direct-to-consumer channels.
The company also expanded Nordstrom Rack, opening 23 new stores and reporting double-digit top-line growth. However, Nordstrom anticipates potential challenges due to a shorter holiday season and broader economic uncertainties.
InvestingPro Insights
Nordstrom's recent financial performance aligns with several InvestingPro Tips and metrics. The company's stock has shown significant momentum, with a 67.02% price total return over the past year and a 10.65% return in just the last week. This strong performance has brought the stock price to 98.76% of its 52-week high, reflecting investor confidence in the company's recent results and future prospects.
InvestingPro Tips highlight that Nordstrom's net income is expected to grow this year, which is consistent with the company's better-than-expected Q3 earnings and Guggenheim's upward revision of EPS estimates. The tip indicating that analysts predict profitability this year further supports this positive outlook.
The company's P/E ratio of 14.14 and adjusted P/E ratio of 12.31 for the last twelve months suggest that the stock may be reasonably valued relative to its earnings, especially considering the expected growth. Additionally, Nordstrom offers a dividend yield of 3.09%, which may attract income-focused investors.
For readers interested in a more comprehensive analysis, InvestingPro offers 10 additional tips for Nordstrom, providing a deeper understanding of the company's financial health and market position.
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