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Nordstrom struggles with merchandising issues amid margin pressure and flat revenue growth

AInvestWednesday, Mar 6, 2024 9:23 am ET
1min read

Nordstrom"s (JWN) posted its Q4 earnings report this morning. The stock is down approximately 8% in pre-market trade as flattish top line growth and margin pressure have led to declining profitability. The company's FY24 outlook was relatively in line with expectations, but the lack of earnings growth is a concern.

Nordstrom, Inc. (JWN) reported Q4 earnings of $0.82 per share, missing the consensus of $0.88. Revenues rose 2.2% year/year to $4.29 billion, slightly missing the $4.38 billion consensus. Despite the revenue growth, Nordstrom faces challenges in its merchandising efforts, which have impacted its profitability.

In Q4, both Nordstrom and Nordstrom Rack reported sequential sales growth, with Nordstrom Rack posting double-digit growth during the quarter. 

The company has provided guidance for FY25, expecting EPS of $1.65-2.05, compared to the $2.01 consensus. This places the midpoint of the guidance below expectations.

FY25 revenue growth is expected to be negative 2% to positive 1%, implying $13.93-14.36 billion, compared to the $14.63 billion consensus. Nordstrom expects a comparable sales range of 1.0 percent decline to 2.0 percent growth versus 52 weeks in fiscal 2023. 

The company is focusing on increasing Nordstrom's digital growth, expanding Nordstrom Rack's store openings, and improving execution to deliver a better customer experience. 

Telsey Advisory Group has raised its JWN target to $19 from $17, citing the company's earnings beat and relative revenue strength. However, the firm maintains its Market Perform rating due to ongoing merchandising issues in both banners and the lack of earnings growth this year. 

As Nordstrom navigates these challenges, it aims to target leverage below 2.5x over time. The company's focus on improving customer experience and digital growth will be crucial in the face of merchandising issues and margin pressure. Investors will be watching closely as Nordstrom continues to navigate these challenges and work towards long-term growth and profitability.


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