The polarizing action in retail continues.
Nordstrom ended the weak week with a retail high note reporting earnings of $0.81 per share on revenue of $3.672 billion. While revenue slightly missed the mark, EPS cruised past estimates of $0.64.
Nordstrom did a fantastic job of expense control and inventory management as well as recognizing merchandising trends. For the full-year, management targeted EPS between $3.30 and $3.50 against a consensus of $3.29. That puts the midpoint ahead of estimates by $0.11 and raises the low end of management's previous guidance by a nickel.
Similar to Macy's, it shows a little potential softness in the fourth quarter. However, unlike Macy's, it also shows the potential for upside. The upper end of the range equals a small Q4 beat while the lower end would be a disappointment. So, Nordstrom dangled all the potentials (miss, beat, in-line) for Q4. That's enough optimism for the shares to recover what they lost earlier this week.
The company is pursuing the same multi-armed strategies as we're seeing across most of traditional bricks-and-mortar, especially those that survive within the confines of a mall. For Nordstrom that includes Full-Price, Off-Price, stores, and online.
The difference between anchors comes down to execution and inventory along with in-store experience. Additionally, digital marketing, including loyalty programs and rewards points, are helping to attract and anchor customers. It's become the go-to method of customer touching.
During the first nine months of the year, Nordstrom repurchased 4.1 million shares at an average price of $43.37. Ouch. Authorization remains for another $707 million in repurchases, or roughly 20 million shares. While that's not likely to be done all at considering the company spent a little less than $200 million during the first nine months, management does have the firepower and authorization to scoop up more than 10% of the company at the current market value if they choose to do so. It should help create support above $30.
The weekly picture above is much stronger than other anchors. Yes, Nordstrom is a little extended from the August lows, but there's an inverse head-and-shoulders in play here.
The right should probably do in the September-October time frame meaning we've already broken out, but I wanted to look at that $38 resistance. Above that level and I believe we've run into the $42 to $46 area, which will become a new trading channel.
If we regress to the $35 area, I'd be on edge. This week's low does serve as secondary support, coincidentally the 21-week simple moving average.
While I'm not ready to jump in on the long side today, a push above $38 will have me looking long with an upside target of 10% to 15%.
This isn't a name I'd consider actively on the short side. There's plenty of weaker choices in the retail sector for that.
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