Nordstrom surge amid Stellar Q4 beat; Off-price Rack eases concerns

Nordstrom surge amid Stellar Q4 beat; Off-price Rack eases concerns
Published - Mar 3, 2022 @ 3:51 PM (EET)

Shares of Nordstrom Inc. (NYSE:JWN) soared over 32% during the after-hours trading session on March 1, the most in two decades, as it eased concerns about the profitability of its off-price division, Nordstrom Rack.

The American omnichannel retailer reported impressive Q4 results and provided better-than-expected FY2022 guidance driven primarily by the positive impact from strategic initiatives leading to sales growth.

Compared to its competitors, such as Macy's Inc., Dillard's Inc., and Kohl's Corp., the company has been recovering more slowly from the pandemic and needed a strong quarter.

Nordstrom reported adjusted earnings of $1.23 per share, more than quintuple the year-over-year amount, with revenue jumping 23% to $4.38 billion, exceeding consensus estimates of $4.36 billion. Moreover, revenue growth, including retail sales and credit-card revenue, is forecast at 5% to 7% for the current fiscal year above analyst expectations of 3.1%.

During its fourth-quarter earnings call, company executives also said it anticipates benefits from optimizing its supply chain in the coming year.

Notably, the luxury department store chain adjusted to supply chain disruptions by improving the consistency and predictability of its product flow in its network.

"Our team continues to work with urgency to accelerate our progress and invest in our capabilities to serve customers better and profitably grow sales. Our primary focus is on three areas: improving Nordstrom Rack performance, increasing profitability, and optimizing our supply chain and inventory flow." - CEO Erik Nordstrom, Nordstrom.

WHY IT MATTERS

Following the earnings beat, Nordstrom is getting draped with buy orders based on its solid expansion in merchandise margins. However, impressive beats and margin growth do not typically lead to the sort of colossal share price gains that Nordstrom has been experiencing.

The biggest headline from the results relates to JWN's off-price Rack banner, which grew sales by 320 basis points sequentially, compared to pre-pandemic FY20 levels.

As JWN sees success in its strategies to improve Rack's performance from last year, investors will be excited about the division's future, especially when looking at the success of other off-price retailers.

To invest in Nordstrom's stock, visit MEXEM.

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