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Nordstrom Inc JWN

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Nordstrom’s Q4 Profitability Was Weak but Its Cost Reduction Plans Are on Track; Shares Fully Valued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

Narrow-moat Nordstrom’s results for the fourth quarter of 2020 and guidance for 2021 were in line with its earlier (January) pre-announcement and (February) analyst event disclosures (see our prior notes). While its fourth-quarter sales decline of 20.0% was marginally better than our forecast of a 21.5% drop, its operating margin of just 0.8% was well below our 3.7% forecast. More positively, the firm realized cost savings of more than $420 million in the year, including more a than $300 million reduction in permanent overhead expenses, which we think should allow it to achieve 2021 EPS around the $1.57 that we had previously forecast. We do not expect to make any material change to our per share fair value estimate of $33.50 and view Nordstrom’s shares as fully valued.

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Company Profile

Business Description

Nordstrom is a fashion retailer that operates approximately 100 department stores in the U.S. and Canada and approximately 250 off-price Nordstrom Rack stores. The company also operates both full- and off-price e-commerce sites. Nordstrom’s largest merchandise categories are women’s apparel (29% of 2020 sales), shoes (26% of 2020 sales), and women’s accessories (14% of 2020 sales). Nordstrom, which traces its history to a shoe store opened in Seattle in 1901, continues to be partially owned and managed by members of the Nordstrom family.

Contact
1617 Sixth Avenue
Seattle, WA, 98101
T +1 206 628-2111
Sector Consumer Cyclical
Industry Department Stores
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Distressed
Employees 62,000

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