JWN Market Research & Analysis Report
Updated Sep 14, 2015

Growth and Balance Sheet

 Nordstrom Inc. (JWN) reported fiscal second-quarter earnings of $211 million. On a per-share basis, the Seattle-based company said it had profit of $1.09. Earnings, adjusted for non-recurring gains, were 93 cents per share. The results topped Wall Street expectations. The average estimate of analysts was for earnings of 90 cents per share. The department store operator posted revenue of $3.7 billion in the period, which also beat Street forecasts.  Second quarter 2015 total sales increased a strong 9.2% with comparable store sales up and industry leading 4.9%. The second quarter results were helped by the 20% increase at Nordstrom.com as well as the entry into Canada. The Anniversary Sale, a long standing event customer’s mark on their calendars, contributed to the increase led by gains in cosmetics and women’s apparel. The full line stores increased 1.1% with comparable store sales rising 0.8%.  The off-price business, up 16%, turned in a strong performance in the quarter. Nordstrom Rack increased 13% with comparable store sales up 1.7%. Nordstrom Rack.com and Haute Look increased 50%. The Trunk Club, with 6 stores currently, was also highlighted as having a positive impact.

The company also raised the lower end its guidance for the full year by a nickel, saying it now expects to earn between $3.70 and $3.80 a share; analysts are looking for $3.76 a share. It also said it now expects revenues to come in between $14.22 billion and $14.36 billion, compared to the $14.24 billion consensus.

Valuation

Nordstrom Inc. P/E stands at 19.48 below the industry average of 20.75, and above the S&P 500 average of 17.55 The company is currently trading above the maximum P/E ratio of 15x, and over the last five years, the company’s shares have traded in the range of 16.10x to 21.00x trailing 12-month earnings. JWN's current Price/Sales of 0.98 is above the average of its industry of 0.77. JWN’s head to head comparison to its main competitors shows that the company has gross margin below its peers, and one that is below the industry average. The achieved operating margin of the company is above the average operating margin of the selected competitors, and it is above the industry average. The quarterly revenue is above the industry average. The stock is currently trading below its intrinsic value of $83.08 this suggests that the stock is undervalued at these levels. The beta of 0.88 implies lower volatility of the stock with respect to the S&P 500. JWN has shown positive earnings consistency over the last five years. Company’s earnings have increased by 13.13% over the same period. The current quarter earnings in comparison to the same quarter last year have decreased by 14.74%. JWN’s Total Debt/Equity of 126.09 is negative. JWN’s current price levels are below the maximum level, is trading 13.60% below the 52 week high of $83.16, and the technical analysis give a bearish view of the stock. The majority of analyst ratings are bullish. JWN provides 1.10 dividend yield and has a payout ratio of 36.97%.

About JWN

Nordstrom, Inc. is a fashion specialty retailer. The Company operates 262 United States stores located in 35 states as well as a robust e-commerce business through Nordstrom.com and HauteLook. The Company operates through two segments: Retail and Credit. The Retail segment includes approximately 117 ‘Nordstrom’ branded full-line stores and online store at Nordstrom.com, approximately 142 off-price ‘Nordstrom Rack’stores, one clearance store that operates under the name ‘Last Chance’ and other retail channels including its online private sale subsidiary ‘HauteLook’ and its two ‘Jeffrey’ boutiques. Credit segment includes its wholly owned federal savings bank, Nordstrom fsb, through which it provides a private label credit card, two Nordstrom VISA credit cards and a debit card.

Competitor Comparison

Nordstrom Inc. (NYSE: JWN) N.V.

Highlights

The Company operated 290 United States stores located in 38 states, as well as an e-commerce business through Nordstrom.com, Nordstromrack.com and HauteLook and TrunkClub.com, as of March 16, 2015. It also operates two Nordstrom full-line stores in Canada. The stock closed yesterday’s trading session at $73.60. In the past year, the stock has hit a 52-week low of $66.08 and 52-week high of $83.16. JWN has a market cap of $13.85 billion and is part of the industrial goods sector.

• Integrated multichannel retailing platform
• Nordstrom Rack cater to price sensitive customers
• Strong return on invested capital

• Excessive dependence on California
• Strong competition

JWN Intrinsic Value

Stock Valuation Model & Intrinsic Value Definitions

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend. JWN's 52 week high is $83.16 current price is 73.16, is 13.60% below the 52 week high.

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a forward P/E ratio of 19.48 below the average industry P/E ratio of 20.75 and is above the S&P 500 P/E ratio of 17.55.

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders.  Insiders own 26.23% of JWN stock. Management's representation is large enough. This does satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model.

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

JWN is trading in the range of $70.70 - $79.98 in the past 30 days. The stock has been showing support at $71.30 and resistance in the $74.50 range. The stock is trading below the 50-Day Moving Average and below the 200-Day Moving Average. The RSI(14) is 50.58. Our indicators give a bearish view on JWN.

The financial health of the company the higher the better, we evaluate all the financial ratios of the company.

Investor’s sentiment for the stock.

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com is 4 Buy, 5 Outperform, 16 Hold, 2 Underperform and 0 Sell.

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. JWN’s annual EPS for the last 5 years were 2.75, 3.14, 3.56, 3.71, 3.72 this type of earnings action is positive.

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 25% or should be less than the average Debt/Equity for its industry. JWN’s have total debt/equity ratio of 126.09 which is negative.

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. JWN’s EPS growth for this quarter relative to the same quarter a year earlier is -14.74%, below our target.

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. JWN’s annual earnings growth rate over the past five years is 13.13%, above the target growth rate.

¹Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.