Nordstrom: Blue-Chip Shoppers

08/05/2005 12:00 am EST

Focus:

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier offers several newsletters, geared towards investors with different risk parameters. His Emerging Growth Letter is now the top 15-year performer on the Hulbert rankings. Here, he shops for a retailer as the latest buy in his Blue Chip Growth portfolio.

"The economy is very strong and retail sales exploded everywhere in June. All the retailers are phenomenal, and companies that cater to upscale customers are clearly prospering. Our latest Buy recommendation is Nordstrom (JWN NYSE), one of the largest upscale apparel retailers in the US, with 95 Nordstrom stores and 50 outlet stores (Nordstrom Rack) in 25 states. With its easy-return policy and personalized touches such as thank-you notes from employees, Nordstrom has developed a reputation for top-notch customer service.

"The company is having a great year. Last quarter, it topped Wall Street’s earnings expectations by five cents a share, plus raised its forecast for the rest of the year. First-quarter earnings rose sharply and beat Wall Street’s expectations. Profits increased by 52% to $104.5 million, or 75 cents per share, from $68.7 million, or 48 cents per share, in the same quarter one year earlier. Sales rose 8% to $1.7 billion, with sales at locations open at least a year increasing by 6.2%. The analyst community expected JWN to earn 70 cents per share on sales of $1.62 billion, so both Nordstrom’s earnings and sales were both better than expected.

"Looking forward, the company raised its full-year earnings guidance to $3.40 to $3.50 per share from its prior forecast of $3.25 to $3.35 per share. Analysts at the time had expected the company to earn $3.38 on sales of $7.53 billion. Nordstrom has also recently benefited from an analyst upgrade by Merrill Lynch, which was impressed with improving same-store-sales trends and inventory management system that’s helping to increase operating margins. In May retail sales surged, and as a sign of confidence, Nordstrom’s board recently approved a 2-for-1 stock split. I’m placing Nordstrom in the moderately aggressive category. Buy below $37."

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