Leading fashion specialty retailer, Nordstrom Inc. JWN, has been gaining traction, backed by its store-growth initiatives, flourishing customer strategy reflecting growth across channels and the latest Trunk Club acquisition. These, in turn, led to sales growth in fourth-quarter fiscal 2014.
Nordstrom offers a broad array of over 500 brands, which primarily falls in the upscale category. This enables it to generate high-margin revenues. Nordstrom also appeals to its consumers by offering a more inclusive selection of quality merchandise, which further distinguishes it from other mall-based department store retailers.
Further, the company has been making continuous efforts to expand its store base. Nordstrom’s focus on store expansion is evident from the series of Rack store openings in fiscal 2014. During the fiscal, the company marked its presence in Canada with the introduction of a full-line store.
Alongside, it opened 2 other full-line stores, 27 Rack stores, purchased Trunk Club and launched Nordstromrack.com in the fiscal. Further, the company plans to keep up with this momentum and strengthen its presence in Canada.
These strategic efforts should not only solidify its market share but also improve longer term top-line trends. The company will remain focused on further exploring the Canadian market, which has an estimated $1 billion sales opportunity with value-creating returns.
Moreover, in a move to capture the rapidly growing men’s clothing market, Nordstrom recently completed the acquisition of Chicago-based provider of personalized clothing services for men, Trunk Club. We believe that this acquisition strategically fits Nordstrom’s business model.
Coming to its financial results, the company posted mixed fourth-quarter fiscal 2014 results, wherein the bottom line was disappointing while the top line exceeded expectations. The company’s fourth-quarter earnings of $1.32 per share decreased 3.6% from the prior-year quarter figure of $1.37 and fell short of the Zacks Consensus Estimate of $1.35. However, total revenue of $4,043 million registered about 9% year-over-year growth and surpassed the Zacks Consensus Estimate of $4,018 million.
Additionally, Nordstrom enjoys a healthy financial status, as evident from its regular dividend payments. Dividend payments highlight a company’s stable cash position and cash flow generating capacity, indicating that it can be growth and income stock.
However, the company’s projections for fiscal 2015 reflect higher costs across the board due to the impact of the Trunk Club acquisition and ongoing infrastructure investments, along with its Rack store expansion plans. Also, Nordstrom issued conservative earnings guidance for fiscal 2015, particularly for the first half. Moreover, we are cautious about the company’s growth prospects due to the soft economic recovery, intense competition and exposure to seasonal fluctuations.
Other well-placed stocks in the sector include Citi Trends Inc. CTRN, The Men’s Wearhouse Inc. MW and Aeropostale Inc. ARO.
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