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Why Nordstrom's (JWN) Earnings Could Surprise In A Tough Retail Environment

Nordstrom, Inc. JWN is one of the nation’s leading fashion specialty retailers, with stores located in a number of states, including full-line stores, Nordstrom Racks, and free-standing shoe stores. Nordstrom serves customers through its online presence and through its direct mail catalogs as well. More importantly, the company will release its quarterly earnings report after the closing bell on August 10.

Nordstrom currently sports a Zacks Rank #2 (Buy), and has defeated its earnings projections in each of its past four operational fiscal quarters by an average of a whopping 40.97%, including an impressive beat of 59.26% last quarter. Also, Nordstom operates in the Retail-Apparel and Shoes industry, which sits in the top 44% of the Zacks Industry Rank.

There have been a handful of disappointing retail earnings recently, but Nordstrom sticks out from the pack for a variety of reasons. Nordstrom features an adequate Zacks Rank, strong earnings history, as well as an Earnings ESP of 4.84%. All of these factors should allow investors to possess optimism as we approach its quarterly earnings release.

Here are 3 additional reasons to be bullish on Nordstrom as we near its report:

1.       Store Expansion to Boost Sales

Nordstrom has continued to focus on its store-expansion strategy. Apart from expanding its footprint within the United States, the company has been actively expanding its presence and customer base in Canada. Nordstrom’s newly opened Canadian stores have led to increased online sales in those regions. Also, the company envisions a $1 billion sales opportunity from its expansion in Canada by 2020, including six planned full-line stores and 15 Rack stores.

Additionally, the company will inaugurate two full-line store relocations in California at Westfield Century City in Los Angeles and at University Towne Center in La Jolla. Furthermore, the company stated that it has opened six Rack stores so far in 2017, with another 11 planned for the fall. Finally, Nordstrom is on track with the opening of its flagship store in Manhattan in 2019 and its first Men’s store in spring 2018.

2.       Strong Style Scores

Nordstrom features impressive “A” grades for the Growth and Value Style Scores categories, while Momentum holds a “B” grade. The company’s “A” grade for Value is partially driven by its strong Cash Flow per Share of $7.75, which towers over the industry average of $1.49. Further, Nordstrom currently holds a respectable 6.33 EV/EBITDA ratio.

Additionally, the company’s “A” grade for Growth is underscored by its 17.15% current cash flow growth and 61.36% RoE, both of which defeat the industry averages of -4.69% and 9.27%, respectively. Also, Nordstrom possesses projected sales growth of 3.19%, in comparison with the meager industry average of 0.04%. Finally, the company holds a “B” grade for Momentum, largely due to its recent share price increase of 16.66% in the past twelve weeks.

3.       Projected Growth in Key Divisions

Sales from specific divisions within the company are expected to continue growing. For example, revenues from all retail stores are projected to total close to $2.62 billion, which would represent a year-over-year increase of around 32%. Also, sales from its nordstromrack.com/Hautelook website are projected to grow 19.5% year-over-year to around $187.55 million.

Overall, our Zacks Consensus Estimate projects Nordstrom to report $3.73 billion in sales, which would constitute year-over-year growth of 2.22%. Further, the Zacks Consensus Estimates expects the company to post earnings of $0.62 per share.

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