J.P. Morgan Neutral on Nordstrom After Earnings

J.P. Morgan is out with a research report on Nordstrom

and it has a Neutral rating and a $55 price target on shares after it reported earnings. In a note to investors, J.P. Morgan writes, "Nordstrom reported 3Q EPS of $0.59 – in-line with our estimate/Street, but below market expectations. The retail margin performance left more questions than answers in our view with gross margins 11 basis points below our model (+37bps vs. JPM +48bps) given a 15 bps free shipping drag and retail SG&A dollar growth up 17.8% (JPM +16.0%) representing deleverage of 85bps. Consistent with peers (M/KSS) earlier this week, credit upside was the largest delta versus our model (credit SG&A lighter by $11mil = $0.03 of EPS). While the JWN story remains fundamentally sound today, tougher comparisons on the top-line (13.6%/18.5% 2-year stacks in 4Q11/1Q12 versus 4.7% in 3Q) and gross margin in 4Q and 1H12, combined with elevated 3Q-end inventory (+11.8%/sq ft) and continued SG&A investment spending constraints (likely through 2012) keep us sidelined on the name for now." Shares of JWN closed at $49.62 yesterday.