QUOTE AND NEWS
newratings.com  Jun 30 
NEW YORK, June 30 (newratings.com) - Analysts at Robert W Baird initiate coverage of Nordstrom Inc (ticker: JWN) with an "outperform" rating. The target price is set to $24. [more]
Market Intelligence Center  Jun 30 
Nordstrom (NYSE: JWN) opened at $19.95. So far today, the stock has hit a low of $19.53 and a high of $20.49. JWN is now trading at $19.75, up $0.10 (0.48%). Over the last 52 weeks the stock has ranged from a low of $6.61 to a high of $37.00....
Business Wire  Jun 17 
Seattle-based Nordstrom, Inc. (NYSE:JWN), a leading fashion specialty retailer, announced it will open a 38,000-square-foot Nordstrom Rack, a unit of the company's off-price retail division, at Buckhead Station shopping center in Atlanta, Ga. in
Market Intelligence Center  Jun 11 
Nordstrom (JWN) appears to be on the move today and is now at $20.75, down $0.02 (-0.10%) on volume of 582,428 shares traded. JWN was covered in a Lee Allen report today. To read the report, go to www.marketintelligencecenter.com/la061109 . Over...
MarketWatch  Jun 8 
Macy's Inc. , Saks Inc. , Nordstrom Inc. and J.C. Penney Co. all saw their stocks lose more than 3% in early trades Monday to weigh on the retail sector as the broader market also took a turn for the worse. The S&P 500 Retail Index lost 1.5% to...
Business Wire  Jun 4 
Nordstrom, Inc. (NYSE:JWN), today reported preliminary retail sales of $653 million for the four-week period ended May 30, 2009, a decrease of 8.7 percent compared with retail sales of $716 million for the four-week period ended May 31, 2008.
Business Wire  May 19 
Nordstrom, Inc. (NYSE: JWN) announced today that its board of directors approved a quarterly dividend of $0.16 per share payable on June 15, 2009, to shareholders of record on May 29, 2009. Nordstrom, Inc. is one of the nation's leading fashion
TheStreet.com  May 18 
Nordstrom and Saks are opening stores in in the Plaza International in San Juan, Puerto Rico.
TheStreet.com  May 15 
The company reports a $101 million second-quarter loss, but meets expectations excluding one-time items.
MarketWatch  May 15 
Retail stocks were mixed Friday after Abercrombie & Fitch Co. posted bigger-than-expected losses and luxury retailer Nordstrom Inc. and department store operator J.C. Penney Co. both reported smaller-than-expected declines in their...
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BULLS: REASONS TO BUY

 
100% agree
 
Fashion Trends

 
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Luxury Protection

 
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Consistent Growth

BEARS: REASONS TO SELL

 
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Nordstrom Announces Huge Same Stores Sales Decline

 
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High Dependency on Holiday Shopping

 
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Fickle Aspirational Customers

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JWN AT A GLANCE
 
 
 
 
 
 
 
 
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Nordstrom (NYSE: JWN) sells apparel, shoes, cosmetics and accessories to customers who are typically between 25-54 years of age and generate a household income in excess of $100,000[1]. The company positions itself as an "affordable luxury" retailer that operates its eponymous department stores in the U.S. exclusively (these generated 95% of all revenue). As of the end of its fiscal 2007, Nordstrom's only exposure to international consumers came from its much smaller Façonnable boutiques.

In 2007 Nordstrom's total sales increased 3.1% from the previous year to $8.8 billion. The company experienced median growth compared to some of its key competitors on the basis of the crucial same store sales retail metric; Nordstrom's 3.9% growth from in 2007 put it in between Saks (11.7%) and Macy's (-1.3%). A portion of this difference can be attributed to its fashion focus on "wear-to-work" apparel, which it offered under its own private label.

The company averaged 7% annual revenue growth from 2001 to 2006, reflecting the growing demand in its "affordable luxury" products. However, like other luxury and near-luxury retailers, Nordstrom is especially vulnerable to slowdowns in consumer spending on such merchandise, which typically exaggerates the peaks and valleys of the overall economy. Consequently, as the economy has slowed down since the subprime lending crisis in the summer of 2007, Nordstrom's sales growth has slowed. In 2007, Nordstrom's total sales grew only 3.1% and its troubles have worsened in 2008 as first quarter sales decreased 3.8% as same store sales in the quarter declined 6.5%. Nordstrom continued to falter in the second quarter of 2008, as same store sales declined 6.0% as net sales fell 4.3%.[2]

[edit] Business Financials

Based in Seattle, Washington, Nordstrom has developed its own niche in the retail industry as an "affordable luxury" retailer, positioned between mid-tier retailers such as the Macy's Inc. (M) stores and high-end, luxury retailers, including Saks Fifth Avenue and privately-held Neiman Marcus. The company sells high-quality apparel, shoes, cosmetics and accessories, targeting customers between 25-54 years of age with an average household income of $100,000[3]. The company operates through four principal branches:

  • Retail Stores: More than 95% of the company’s total revenues are generated through its retail store division, which, as of May 2008, consisted of 105 Full-Line ‘Nordstrom’ stores, 50 discount ‘Nordstrom Rack’ stores, two clearance ‘Last Chance’ stores, and two boutique shoe stores.
  • Direct: Nordstrom also sells its products through its e-commerce website Nordstrom.com and catalogs.
  • Credit: In owning its own federal savings bank, Nordstrom offers a private label card, two co-branded Nordstrom VISA credit cards and a debit card for Nordstrom purchases. These give rise to a shopping-based loyalty program designed to create incentives for increased customer consumption[4].
  • Other: This segment involves the product development and design team, Nordstrom Product Group and corporate center operations[5].


Nordstrom has realized consistent growth for the past four years; in fiscal 2006, the company experienced a 10.8% jump in net sales and a 7.5% increase in same-store sales, a slight step up from 6% in fiscal 2005.[6] Such growth can be attributed to the aggressive integration of designer products into store inventories as well as the increase in store locations. However, sales growth began to slow in 2007 as total sales grew only 3.1% during fiscal 2007 and sales declined 3.8% in the first quarter of fiscal 2008.



[edit] Business Growth

[edit] Q4 FY2008 (ended January 31, 2009)

  • JWN's net income slipped 68% as compared with the previous-year fiscal quarter, from $212 million in Q4 2007 to $68 million in Q4 2008, due to lowered demand for high-end apparel and consumer goods during the recession. [7]
  • Net sales were $2.3 billion in Q4 2008, down 8.5% from net sales of $2.5 billion in Q4 of last year. In a challenging recessionary environment, JWN suffered from low consumer demand for its mid-to-high-end merchandise and struggled to adjust inventory levels and reduce costs. To mitigate pressures on its operating profit, JWN decreased its SG&A expenses by $25 million during Q4 2008, excluding costs incurred from new store openings that increase retail square footage by 6.7%. [7]
  • For the off-price line Nordstrom Rack stores, comparable store sales decreased by 1.5% during Q4 2008, performing on-par with competiting off-price retailers. For full-line Nordstrom stores, comparable-store sales decrease 15.8%, reflecting the low level of consumer demand for higher-end Nordstrom merchandise. [7]
  • Operating profit for Q4 2008 was $66 million, and operating margin was 2.9% of net sales. This is a 940 bps decrease from Q4 2007, during which operating profit was $308 million, or 12.3% of net sales. [8]


Metric 3Mon ended Q4 FY2008 % Change 3Mon ended Q4 FY2007
Net Sales Revenue $2301 -8.5% $2514
Gross Profit $736 -22% $945
Operating Margin 2.9% -9.4% 12.3%
Net Income $68 -68% $212
Sales/Retail Sq Ft $103 -14.2% 120


[edit] Trends and Forces

[edit] Luxury retail exaggerates swings in economic cycles

Since Nordstrom, an affordable luxury retailer, has seen substantial growth from expanding its designer product inventory, decreased luxury consumption could considerably affect the company’s success. Luxury goods are cyclical and correlate with GDP in specific regions, often exaggerating the up- and down-swings; in boom times, consumers' demand tends to grow faster than the growth of economies (as measured by GDP). On the flipside, slowdowns can cause sales to retreat rapidly, as consumers buy fewer high-priced luxury goods.

[edit] High dependence on fashion trends

Much of success in the retail business depends on the company’s ability to predict and anticipate consumer tendencies as order agreements are made months in advance of sales to consumers. Consequently, if the company inaccurately predicts consumer preferences, it could face lower sales, an overflow in inventories and lower profit margins—all of which would adversely affect the company’s financial health.

[edit] Information technology puts Nordstrom ahead of its competitors

Information technology allows for retail stores to manage their inventory and more quickly manage their merchandise based on what appeals to customers. Given the value of information technology to effective merchandise management and development, Nordstrom commits approximately $170 million per year on such initiatives.

[edit] Competition

Key competitors in the mid-tier department store industry include Macy's Inc. (M) , Dillard's (DDS) and JC Penney, and companies in the luxury retail industry include Saks Fifth Avenue and privately held Neiman Marcus. Nordstrom occupies a positioning between mid-tier and luxury department stores in terms of its merchandise offerings.

  • Macy's Inc. (M) operated 853 retail stores in the U.S., Puerto Rico and Guam as of April 2008.
  • Saks has 54 stores, with its top-tier Saks Fifth Avenue chain having locations in Saudi Arabia, the United Arab Emirates, Mexico City and China.



[edit] Operational Metrics Compared

As shown below, Nordstrom remains in the middle of the pack in net sales, but its operating margin is the second highest amidst the competition at 10.6%[10]. Importantly, Nordstrom has consistently seen the greatest same-store sales growth, topping off at 7.5% while the next highest figure is 5.9%, belonging to Kohl’s.


Nordstrom’s Comparison to Competing Department Stores
Dillard's (DDS) Macy's Inc. (M) JC Penney Kohl’s Nordstrom Saks Neiman Marcus
Net Sales (mn) 7,207 26,313 19,860 16,474 8,828 3,282 4,390
Operating Margin 0.1% 7.9% 9.5% 11.0% 13.3% 1.4% 10.8%


Nordstrom compared to Competitors Using Same-Store Sales Growth
Year Nordstrom Saks Macy's Kohl's JC Penney
2003 4.1 1.6 (0.9) (1.65) 0.9
2004 8.5 5.3 2.6 0.3 5.1
2005 6.0 2.1 1.3 3.6 2.9
2006 7.5 4.9 4.4 5.9 3.7
2007 3.9 11.7 (-1.3) (-0.8) 0.0

[edit] References

  1. Nordstrom (JWN) 10-K, Fiscal year 2007, “Business,” p. 4
  2. Nordstrom (JWN) Press Release, Second Quarter 2008 Earnings
  3. Nordstrom (JWN) 10-K, Fiscal year 2007, “Business,” p. 4
  4. Nordstrom (JWN) 10-K, Fiscal year 2007, “Business,” p. 4
  5. Nordstrom (JWN) 10-K, Fiscal year 2007, “Business,” p. 4
  6. Nordstrom (JWN), Fiscal year 2007, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” p. 14
  7. 7.0 7.1 7.2 JWN Q4 2008 Earnings Report Press Release
  8. JWN Q4 FY2008 Income Statement, Google Finance
  9. Company data
 
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