Nordstrom: Still Relevant in Changing Retail World

10/07/2019 5:00 am EST

Focus: CONSUMER

David Fried

Editor, The Buyback Letter

Nordstrom, Inc. (JWN) is a leading fashion retailer based in the U.S., explains David Fried, editor of The Buyback Letter, which, as its name suggests, focuses exclusively on stocks that are actively undergoing buyback and stock repurchase programs.

It began as a shoe store in Seattle, and now operates 380 stores in 40 states, including 118 full-line stores in the U.S., Canada and Puerto Rico; 248 Nordstrom Rack stores; three Jeffrey boutiques; two clearance stores; six Trunk Club clubhouses; and three Nordstrom Local service concepts.

The online customers are served at Nordstrom.com, Nordstromrack.com, HauteLook and TrunkClub.com.

Nordstrom has found a way to remain relevant in the challenging retail market that is increasingly moving online, when others may not have (Sears, JCPenney come to mind).

And the company is hoping for a kick start by opening new Nordstrom Local stores – smaller in size, offering personal styling services and alterations; these Locals are also a hub for picking up online orders.

Customers can order items shipped to the Local store to try on in person, and purchase them that day if they like. Co-president Erik Nordstrom notes that people who visit a Nordstrom Local store spend 2.5 times more than people who visit a regular Nordstrom.

The Locals will also begin to accept merchandise returns from rivals like Macy’s and Kohl’s at these smaller-format locations. JWN also recently opened its 7th Nordstrom Rack in Canada. The Rack is the off-price retail division of Nordstrom.

Long attractive to dividend investors looking for income and growth, JWN has a rising dividend yield. It’s a heavy importer of goods made in China, so the stock price has been sensitive to tariff-related news, and has whipsawed back and forth depending on news events. Q2 came in better than expected.

The company earned 90 cents a share on revenue of $3.87 billion, while analysts were looking for EPS of 77 cents on revenue of $3.92 billion. For the full year, Nordstrom expects to earn $3.25-$3.50, compared with a previous range of $3.25-$3.65, and the $3.27 consensus estimate.

The company sees net sales declining 2%, down from its prior outlook for flat to 2% growth. Shares outstanding have been reduced by 7.609% in the last 12 months.

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