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Nordstrom Up 18% in a Year Amid Tough Landscape: Here's Why

Shares of Nordstrom, Inc. JWN are riding high on robust long-term strategies, continued focus on store expansion, robust online business and impressive earnings history. Moreover, in the past one year, the stock has gained 17.5%, underperforming the Zacks categorized Retail-Apparel/shoe industry’s decline of 22.4%. Let’s delve deeper.

Operating in a consumer-driven space requires companies to conform to the trends of the evolving retail industry that is focused on offering maximum choices to customers along with enhancing shopping experience. Nordstrom has been doing exactly this, which has aided it to retain its position amid a difficult landscape.

Nordstrom is making significant progress with respect to its customer-based strategy and is on track to reach long-term growth target of $20 billion by 2020. In a bid to do so, the company is executing its strategy of enhancing market share and strengthening capabilities through further investments. With regard to cost savings, the company plans to strike a balance between sales and expense growth. Moreover, it is focused on advancing in the technology space by boosting eCommerce and digital networks along with improving supply-chain channels and marketing efforts.

Apart from expanding footprint in the U.S., the company has been actively expanding presence and customer base in Canada. This was confirmed when Nordstrom’s newly opened Canadian stores led to increased online sales in those regions. Further, having done a great job with its full-line stores in Canada, Nordstrom is now keen to expand Rack store base in the country. The company envisions a $1 billion sales opportunity from expansion in Canada by 2020, including six planned full-line stores and 15 Rack stores.

Nordstrom has always been aggressive with store expansion strategy. The company has opened a total of 298 stores since 1990, while it closed only 17 stores. Additionally, the company is scheduled to open three full-line and 12 Nordstrom Rack stores this fall, including Rack store at Woodmore Towne Center in Glenarden, MD.

However, the Zacks Rank #3 (Hold) company remains susceptible to the macroeconomic headwinds looming over the retail environment. The company’s global presence also exposes it to the risk of adverse foreign currency fluctuations, among other risks associated with operating internationally. Further, it faces stiff competition from other major players that poses threats to operating performance and market share.

Consumers’ transition toward online shopping is troubling most retailers, as they are struggling to keep up with the major online players in the industry. Amid such a scenario where most retailers are trimming their store count and declaring bankruptcy in response to sluggish traffic, Nordstrom’s family is contemplating plans to go private.

Key Picks in Retail Space

Better-ranked stocks which warrant a look in the retail space include G-III Apparel Group, Ltd. GIII, Guess', Inc. GES and The Children's Place, Inc. PLCE. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

G-III Apparel Group has an impressive long-term earnings growth rate of 15%.

Guess' has an impressive long-term earnings growth rate of 17.5% and also surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 33%.

The Children's Place has reported earnings beat in the trailing four quarters, with an average of 36.6%.

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Nordstrom, Inc. (JWN): Free Stock Analysis Report
Children's Place, Inc. (The) (PLCE): Free Stock Analysis Report
Guess?, Inc. (GES): Free Stock Analysis Report
G-III Apparel Group, LTD. (GIII): Free Stock Analysis Report
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