Nordstrom: High-Class Profits
The seller of impressive merchandise boasts impressive earnings -- and a surprisingly down-to-earth stock price.
If you want a pair of Amalfi slingbacks, you can buy them at several boutiques and at a couple of department stores. But if want to buy them in a space surrounded by a wonderland of other high-fashion merchandise for the entire family and you want top-notch service to boot, you go to Nordstrom.
The Seattle-based retailer is so firmly entrenched as the go-to clothier for the well-to-do that even Wall Street has a hard time realizing how good it is. On May 18, Nordstrom (symbol JWN) posted earnings for the quarter that ended May 5 of 60 cents a share, or three cents a share more than analysts expected.
By coincidence, two other department-store chains reported earnings the same day, and news reports lumped them together. Kohl's (KSS) and J.C. Penney (JCP) also had strong quarters, and both said that brands only available at their stores bolstered results. That may be true, but grouping Nordstrom with middle-brow retailers ignores the fundamental difference between them and Nordstrom.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Nordstrom's exclusivity is on a different order. It has many brands that wouldn't be caught dead in a Kohl's or Penney's or Target. And its own private-label merchandise carry profit margins that dwarf those of the higher-end Polo Ralph Lauren merchandise sold at Kohl's and Penney's. Even among luxury retailers, Nordstrom ranks highest for "customer experience," according to the Luxury Institute, which surveys the wealthiest Americans. And the well-heeled care less about gas prices and other economic jitters. That distances Nordstrom from factors that affect other retailers more quickly.
The company's revenue growth comes mainly from improving sales at existing stores, not from opening new ones. It has 98 full-line Nordstrom stores, 50 Nordstrom Rack outlets stores and 40 Faconnable boutiques, 36 of them in Europe. Although it just opens just three or four new stores every year, sales are expected to rise 8% from 2007 to 2008.
Despite Nordstrom's strong position, its price-earnings ratio is in line with its industry. Nordstrom shares, which closed at $52.05 on May 22, sell at 19 times the average of analysts' earnings estimates of $2.89 a share for the fiscal year that ends next January, according to Thomson Financial. Analysts see $3.30 a share the following year.
But Zacks Equity Research analyst Robert Plaza thinks the estimates are too low. He has Nordstrom earning $3.38 in the fiscal year that ends in January 2009. He says that while Nordstrom increased its earnings guidance for the current fiscal year, "the company should easily beat those numbers." He rates the stock a buy.
-
Stocks See First Back-to-Back Losses of 2026: Stock Market TodayRising geopolitical worries and a continued sell off in financial stocks kept pressure on the main indexes on Wednesday.
-
Countries That Will Pay You to Move: Cash Grants, Incentives and What to KnowExplore real relocation incentives — from cash grants and tax breaks to startup funding — that make moving abroad or to smaller towns more affordable and rewarding.
-
Mortgage Protection Insurance: What It Covers and When It Makes SenseHow mortgage protection insurance works, what it costs, and when it’s actually useful in a financial plan.
-
If You'd Put $1,000 Into Lowe's Stock 20 Years Ago, Here's What You'd Have TodayLowe's stock has delivered disappointing returns recently, but it's been a great holding for truly patient investors.
-
If You'd Put $1,000 Into 3M Stock 20 Years Ago, Here's What You'd Have TodayMMM stock has been a pit of despair for truly long-term shareholders.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have TodayHome Depot stock has been a buy-and-hold banger for truly long-term investors.
-
What the Rich Know About Investing That You Don'tPeople like Warren Buffett become people like Warren Buffett by following basic rules and being disciplined. Here's how to accumulate real wealth.
-
If You'd Put $1,000 Into Bank of America Stock 20 Years Ago, Here's What You'd Have TodayBank of America stock has been a massive buy-and-hold bust.
-
If You'd Put $1,000 Into Oracle Stock 20 Years Ago, Here's What You'd Have TodayORCL Oracle stock has been an outstanding buy-and-hold bet for decades.
