Attention Investors: Nordstrom's (JWN) stock at a new low

Last week Nordstrom, Inc. (NYSE:JWN) slashed its forecast for Q3 profit, citing disappointing sales and bulging inventory. The stock fell hard and is now at a new 52-week low, trading around $38 a share from a 52-week high of $59.70. Wall Street is overreacting, this is Nordstrom, not the Gap (GPS) or Coldwater Creek (CWTR) and investors waiting to jump in, now is the time.

Nordstrom plans to earn 50 to 53 cents a share for Q3, down from their previous projection for earnings of 61 to 64 cents. The knife in the back for Nordstrom is their reduced forecast for third-quarter comparable sales to a gain only 2 to 4%. The Seattle based retailer's previous forecast was for an increase of 4 to 5%. The sky is not falling America, this is Nordstrom, the Cadillac of the Apparel Industry.

I don't care if Nordstrom's comparable-store sales only went up 3.2% in the five weeks that ended Oct. 6, less than the 4.9% analysts estimated. Big Deal! Nordstrom said it was taking “additional markdowns.” The company had increased inventories as part of its strategy to offer more designer goods at about a quarter of its 100 stores.

Nordstrom president Blake Nordstrom said, “We are taking immediate action to bring inventory levels in line, which will negatively impact merchandise margins for the remainder of the year.” The guy is all over it and when Q3 earnings are released on Nov. 19th, I'm sure Nordstrom's stock will do just fine.

On Oct 12th, Lehman Brothers reduced Nordstrom's target price from $58 to $55. Wow, $3, better sell all shares now. Then on Oct 18th Goldman Sachs downgraded shares of Nordstrom Inc. to "Neutral" from "Conviction List Buy," and said unseasonably warm weather and a build up of inventory have changed the department store operator's near-term prospects. They went on to say "we believe a non-accommodating macro backdrop and continued warm weather could create further downside over the next several quarters as executives play catch-up."

So everyone is against Nordstrom and that's great for investors that haven't made a position yet in this stock, so my vote is to let shares fall even lower. In the past year after climbing to $59 the stock has been on a bumpy ride, and over the past 52-week the stock is down 20% with the biggest downfall occurring in the last two weeks:Nordstrom Inc. (JWN)

Nordstrom's P/E is at 14.2, compare that to Macy's (M) 18.73, The Gap's (GPS) 19.42, Abercrombie & Fitch's (ANF) 15.96 and you can start to appreciate the situation at hand.

Just look at their numbers over the last two years courtesy of Google Finance:

Financials

(In millions of USD)

Income Statement Quarterly
(Aug '07)
Annual
(2007)
Annual
(2006)
Total Revenue 2,389.50 8,560.70 7,722.86
Gross Profit 875.58 3,206.75 2,834.84
Operating Income 239.44 909.89 734.17
Net Income 180.43 678.00 551.34
Balance Sheet      
Total Current Assets 3,507.84 2,742.19 2,874.16
Total Assets 5,565.55 4,821.58 4,921.35
Total Current Liabilities 1,560.92 1,433.14 1,623.31
Total Liabilities 3,659.59 2,653.06 2,828.67
Total Equity 1,905.97 2,168.52 2,092.68

 

It's a work of art. People love to shop at Nordstrom, they treat their customers like royalty. Don't sleep on their stock for long.

Epinions.com reiterates that opinion, read the 38 reviews:

Nordstrom

Overall service rating: Store Rating: 4.0
Reviewed by 38 customers

 

 

 

 

 


TheStockmasters.com - Finally Wall Street Commentary that means something. Frank Lara Jr.

 

 

Article by Frank Lara Jr.

Contributor at TheStockMasters.com

Disclaimer: The Author does not hold any positions or shares in the securities mentioned in this publication.

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