4 Nordstrom Analysts React To Mixed Q1 Earnings: 'We Remain Skeptical'

Zinger Key Points
  • Nordstrom said net sales at its namesake stores grew 23.5% in the quarter, while Nordstrom Rack sales were up 10.3% from a year ago.
  • "We think macro pressures will likely put earnings at risk, particularly in 2H," Bank of America analyst Lorraine Hutchinson wrote.

Nordstrom, Inc. JWN shares traded higher by 11% on Wednesday after the company reported strong first-quarter sales numbers and raised its full-year guidance.

On Tuesday, Nordstrom reported a first-quarter adjusted EPS loss of 6 cents, slightly missing consensus analyst estimates of a 5-cent loss. First-quarter revenue of $3.57 billion exceeded Wall Street expectations of $3.28 billion. Revenue was up 19% from a year ago.

Nordstrom said net sales at its namesake stores grew 23.5% in the quarter, while Nordstrom Rack sales were up 10.3% from a year ago.

Looking ahead, Nordstrom raised its fiscal 2022 revenue growth guidance from a previous range of between 5% and 7% to a new range of between 6% and 8%. The retailer also raised its 2022 adjusted EPS guidance from a previous range of between $3.15 and $3.50 to a new range of between $3.38 and $3.68.

Related Link: 4 Ross Analysts React To Q1 Earnings Miss, Guidance Cut, Execution Missteps

Challenging Visibility: Credit Suisse analyst Michael Binetti said Nordstrom's first-quarter revenue growth was impressive, but its guidance is baking in significant improvements in the second half of the year.

"The biggest concern we have isn't near-term sales trends, but EBIT dollar growth skewed significantly to 2H leaves a lot of risk to the year in our view (if for no other reason than our view that planning a retail business beyond a few months is very hard right now)," Binetti wrote.

Telsey Advisory Group analyst Dana Telsey said visibility is still challenging given the macroeconomic headwinds in the retail sector.

"With its profitable digital business, a more optimized brick-and-mortar fleet, ongoing operational efficiencies (supply chain and inventory management), and the potential for further merchandise margin improvement, we are encouraged by the potential for FY22 and beyond," Telsey wrote.

Guidance Risk: Bank of America analyst Lorraine Hutchinson said Nordstrom's sales are improving, but she sees risk to the company's margin guidance.

"We think macro pressures will likely put earnings at risk, particularly in 2H," Hutchinson wrote.

BMO Capital Markets analyst Simeon Siegel said Nordstrom shares are cheap, but it has set the bar extremely high with its guidance hike.

"Street estimates remain below or near the low-end of even the prior guidance levels and given the tough macro environment and slight beat in the quarter, we remain skeptical that investors are going to give JWN credit for the guide until there is more sustained progress," Siegel wrote.

Ratings And Price Targets:

  • Bank of America has an Underperform rating and a $21 target.
  • Credit Suisse has a Neutral rating and a $26 target.
  • Telsey Advisory Group has a Market Perform rating and a $28 target.
  • BMO Capital Markets has a Market Perform rating and a $28 target.

Photo: Brenda Rocha - Blossom via Shutterstock

 

Posted In: Bank of AmericaBMO Capital MarketsclothingCredit SuisseDana TelseyDepartment StoresLorraine HutchinsonMichael BinettiretailshoppingSimeon SiegelTelsey Advisory GroupAnalyst ColorEarningsNewsPrice TargetTop StoriesAnalyst RatingsTrading Ideas

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