Sometimes it is good to be last. That's the case with Nordstrom (JWN) and its second-quarter earnings.
Expectations were so low you need a backhoe to find them. The stock has added 15% on Thursday after a strong push on Wednesday. Net, it is roughly 20% higher from Wednesday's open. The question now becomes is the bottom in for mall anchor retail, was Nordstrom that much better than other names, or is this a short-term oversold bounce?
In terms of how good were Nordstrom's numbers, I'd say they weren't. Yes, the earnings per share of $0.90 versus the $0.75 estimate grabs headlines, but while EPS was only down 5% year over year, net earnings were actually lower by 13%.
Revenue of $3.78 billion came up shy of the $3.93 billion estimate. Management did do a fantastic job of clearing inventory, which was lower by 6.5% and cutting costs, but this wasn't a pickup in business that fueled a beat, it was a demonstration of fiscal management. And there's something to be said for that, we can't dismiss it.
Digital sales rose 4%. While it is nice to see growth somewhere, digital is exploding elsewhere in other retail names. This is an area of opportunity for Nordstrom, but it has to find a way to seize it as full-price department sales continue to fall. Admittedly, the fall in off-priced Nordstrom Rack surprised and disappointed me.
I do like the fact management isn't sitting on its hands. Opening a women's merchandise only store in New York City in the fall will allow Nordstrom to test the concept of core audience. Additionally, the Nordstrom Local concept is intriguing as it could spur those digital sales. These are pick-up centers for online orders that also offer personal styling and tailoring services. Perhaps, a little jab at Stitch Fix (SFIX) and Amazon's (AMZN) Prime Wardrobe.
Low expectations, a huge 27% short interest, and management with at least some assemblance of a game plan are likely the driving factors now. I don't think it is guidance. The only way it is guidance is because of low expectations. Management lowered the full-year top end to $3.50 per share from $3.65 while maintaining a $3.25 floor.
Before the second-quarter report, the second half of the year guidance held a midpoint of $2.48 per share. That number is now down to $2.245 per share. Again, it's not strong guidance boosting price.
Even as I'm typing Nordstrom is pushing $31 per share. If the stock can hold above the $30.50 level through the close of trading Friday, we have a potential breakout on the weekly chart. With the Full Stochastics crossing above and out of oversold territory, this might be enough fuel to start a rally back to $35, if not $37.50.
While I'm not terribly bullish for the long-term on mall anchor retail names, Nordstrom's push higher may not be done. I wouldn't be in a hurry to fade this.
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