What Cheesecake's Q4 Results Mean for Nordstrom?

The lukewarm quarterly comps and traffic trends at The Cheesecake Factory Inc. spells trouble for apparel retailer Nordstrom Inc., which reports its fourth-quarter results on Feb.18 after the market hours. Wall Street expects Nordstrom to earn $1.22 a share for the fourth quarter and $3.37 a share for the full year. Sales for the fourth quarter are projected at $4.23 billion and full year at $14.43 billion. Credit Suisse's Michael Exstein said Cheesecake Factory sales is considered as an indicator of Nordstrom comp sales, given the overlap in locations and customer base. Comparable sales growth at the Cheesecake Factory segment has historically been highly correlated to Nordstrom Full-Line sales. Cheesecake's fourth quarter comps of 1.1 percent came in below consensus view of 1.5 percent and were at the low end of the company's outlook of 1-2 percent. Traffic deteriorated to 1.9 percent. Related Link: www.benzinga.com/analyst-ratings/analyst-color/16/02/6352516/cheesecake-factory-needs-more-sweet-to-enthuse-street Cheesecake reported fourth-quarter comp sales growth of 1.1 percent for the Cheesecake Factory segment, a significant deceleration from comps of 2.2 percent in the third quarter of 2015.Traffic declined 1.9 percent, the largest quarterly decrease seen for at least the past 5 years, hurt by several holiday shifts. "With CAKE and JWN sharing a similar customer base and locations, we believe that the deceleration in comps and negative traffic could be negative read-throughs for JWN's sales performance," Exstein said in a note to clients. On the positive side, Nordstrom may have seen a pickup in sales at the end of their fourth quarter as Cheesecake management commented that their first quarter started strong, potentially because weather overall was better than last year. Cheesecake's fourth quarter ended Dec. 29, 2015, a month earlier than Nordstrom's fourth quarter, which ends around Jan. 31. Shares of JWN were up 3 percent at $52.41. Exstein has a "neutral" rating and $60 price target on JWN stock.