U.S. markets fared surprisingly well on Wednesday, with traders seemingly getting used to the headlines from overseas. Soaring energy commodities continued to be the biggest winners in general, but investors were also surprised to see that Wednesday’s best-performing stock was a well-known retail brand. Nordstrom (NYSE: JWN) skyrocketed after it reported a surprisingly strong fourth quarter, despite expectations to the contrary.
Nordstrom’s results were surprising for a few reasons. Many analysts were already skeptical about the company’s future prospects, citing supply chain problems and rampant inflation as potential threats. Even though some other retailers, like Walmart and Target, have done well, many others have floundered during this recent earnings season.
Apparently, Nordstrom wasn’t one of them. The company saw revenues climb to $4.49 billion compared to last year’s $3.65 billion. That’s also $120 million higher than what most analysts were expecting. Earnings were similarly strong, with Q4 net income rising to $200 million, a drastic improvement from the $33 million net profit reported in Q4 2021.
“Our primary focus is on three areas: improving Nordstrom Rack performance, increasing profitability and optimizing our supply chain and inventory flow. Our progress has given us line of sight to achieve in the coming year,” said Nordstrom CEO Erik Nordstrom. The company expects revenue growth in 2022 of somewhere between 5-7% as online sales continue to grow.
The only issue with Nordstrom’s earnings was from its off-price Rack business. Net sales remain below 2019 levels, whereas Nordstrom’s normal full-line department stores are more or less at the same revenue levels as back then.
Shares of Nordstrom were up over 38% on Wednesday following the news. That would seem like a pretty big jump for any retailer in any other market climate, even if its earnings results were impressive. However, a lot of this has to do with the fact that many Wall Street experts are downright bearish on Nordstrom right now.
This included Bank of America and JP Morgan analysts, both of whom had bearish ratings on the company. Bank of America said that it still expects Nordstrom to grow at a slower rate than its peers, despite the results. JP Morgan said that Nordstrom still had excess inventory after aggressively stocking up for the holidays. While most analysts are bearish or neutral, only a handful were optimistic for the company going forward.
Big-name retailers have been a surprising winner in this earnings season. Both Walmart and Target reported impressive sales numbers during their own Q4 reports, news which helped send shares of both companies surging. In the long-run, however, there’s a lot of questions about how big name retailers will fare in inflationary environments.
Nordstrom Company Profile
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. – Warrior Trading News
