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Thursday August 18, 2011
Nordstrom (JWN): Value shopping
by Geoffery Seiler, editor Bullmarket.com  Recommended List selection Nordstrom (JWN) provided more evidence last night that high-end retailers are recovering quite well. The Seattle-based department store operator reported that its second-quarter net income jumped 20% as sales grew by more than 12%. Management also raised its outlook for the year. Sales gains helped Nordstrom to report a profit of $175 million, or 80 cents per share, for the quarter ended July 30th, compared with year-ago net income of $146 million, or 66 cents per share. Revenue climbed to $2.72 billion from $2.40 billion if Q2 2010, powered by a consolidated 7.3% increased in sales on a same-store basis. The same-store gains at the Nordstrom Rack off-price unit were especially noteworthy given that concept, until recently, managed only modest gains. Looking ahead, the company guided for sales on a same-store basis to increase by 4-6% this year and for EPS of $2.95 to $3.10. Its outlook was raised from the $2.80 to $2.95 it had forecast in May. Analysts thought the company was low-balling because the consensus estimate prior to last night's report was for Nordstrom to earn $3.04 per share this year. In our view, this was another strong quarter from Nordstrom that shows affluent consumers are still spending. The metrics were all very encouraging. In addition to the solid same-store sales gains, the increased sale of full or nearly full priced merchandise drove a nice increase in the company's overall gross margin. Management remained bullish about the year, but didn't offer any commentary about whether this week's stock-market gyrations might lead to a pullback by its customers, which is the biggest risk facing the company. It's not a coincidence that high-end retailers reported solid sales gains as the market recovered from the 2009 bottom. We think the stock is still cheap and Nordstrom is clearly executing well. Some of that performance stems from the fact it sells mostly third-party designer merchandise with fat margins. As long as its customers continue to spend, Nordstrom should do well. We continue to rate the stock a "Buy" with a $55 target. Learn more about this financial newsletter at Geoffrey Seiler's BullMarket.com. A daily investment service that is committed to creating long-term wealth for its members, BullMarket.com's Recommended List of stocks was up +40% in '09 and over +20% in '10. As a subscriber, you'll receive actionable market commentary, real-time trade alerts, and access to 40+ stock ideas on the Recommended List. Plus, sign up for a free trial today and get instant access to Bull Market's invaluable Special Reports and Earnings Previews. Get a Risk-Free Trial to Bull Market Today! 
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