Nordstrom: Strength in Luxury
Customers still seem willing to pay up for upscale goods.
Luxuries haven't taken a hit because of high gas prices and a slowing economy, if upscale department-store chain Nordstrom's recent performance is any measure. And there's evidence the trend will continue.
Nordstrom (symbol JWN) reported a 20% jump in second-quarter earnings and an 8% rise in revenues, driven by sales of designer apparel, accessories and cosmetics. In a conference call on Friday, Pete Nordstrom, executive vice-president in charge of department stores, said that sales of regular-priced items were strong during the quarter -- proof that the price of luxury goods doesn't seem to be a barrier for Nordstrom's customers. He also reported that response to the chain's fall merchandise has been "favorable" so far.
The company's income rose to $179 million or 67 cents per share during the second quarter. That's up from $150 million or 53 cents per share a year ago. Nordstrom also raised its full-year 2006 earnings to a range of $2.31 per share to $2.39 per share, up from its previous forecasted range of $2.24 per share to $2.32 per share.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

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.
Despite Nordstrom's rosy outlook, the company's stock has remained virtually flat since the earnings announcement, ending Friday at $36.68. That's because Nordstrom's results included a one-time, $5.6 million settlement from Visa/MasterCard. Excluding that gain, Nordstrom only beat Wall Street's forecasts by a penny.
Because Nordstrom has developed a reputation in recent quarters for beating guidance by a wider margin, some analysts said they expected more from the Seattle-based chain, which operates 156 stores in 27 states. Michelle Tan, an analyst with UBS Equity, summed up Nordstrom's performance as "a strong, though not-too-exciting second quarter." Tan currently rates the company a "buy," with a 12-month price target of $45. Nordstrom's shares currently trade at 15 times analysts' 2006 earnings estimates of $2.34 per share, according to Thomson First Call.
Citigroup analyst Deborah Weinswig maintained her "hold" rating on the company, but increased her 12-month target price from $39 to $41. Weinswig said the company's results reflect progress in its efforts to revamp merchandise and better manage inventory. She added that stronger sales in the women's division this quarter are proof that Nordstrom's improvement plan is "gaining traction."
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
How Your Social Security Check Changes at Ages 62, 65, 66, 67 and 70
The longer you wait, the bigger your Social Security check. We break it down by the most common ages when people claim their benefits.
-
Lock or Float? How to Decide on Your Mortgage Rate
Mortgage rates move daily, here’s how to know if you should lock in a rate now or let it float until closing.
-
If You'd Put $1,000 Into Sherwin-Williams Stock 20 Years Ago, Here's What You'd Have Today
Sherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
If You'd Put $1,000 Into UnitedHealth Group Stock 20 Years Ago, Here's What You'd Have Today
UNH stock was a massive market beater for ages — until it wasn't.
-
What Tariffs Mean for Your Sector Exposure
New, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
How to Invest for a Fall Interest Rate Cut by the Fed
A lot can happen between now and then, but the probability the Fed cuts interest rates in September is back above 80%.
-
Are Buffett and Berkshire About to Bail on Kraft Heinz Stock?
Warren Buffett and Berkshire Hathaway own a lot of Kraft Heinz stock, so what happens when they decide to sell KHC?
-
How the Stock Market Performed in the First 6 Months of Trump's Second Term
Six months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
If You'd Put $1,000 Into Berkshire Hathaway Stock 20 Years Ago, Here's What You'd Have Today
Berkshire Hathaway is a long-time market beater, but the easy money in BRK.B has already been made.
-
If You'd Put $1,000 Into Procter & Gamble Stock 20 Years Ago, Here's What You'd Have Today
Procter & Gamble stock is a dependable dividend grower, but a disappointing long-term holding.