High end department store Nordstrom (JWN) reaffirmed guidance for the year and provided some long term financial targets at its Investor Day today.
Nordstrom reaffirmed fiscal 2019 guidance, calling for adjusted EPS of $3.35-3.55 and EBIT (earnings before interest and taxes) of $895-940 million on revenue of $15.2-15.4 billion with comparable store sales up 0.5-1.5%.
Nordstrom also set the following financial targets through fiscal 2022:
- Net sales are expected to grow 3-4% on an average annualized basis from 2017 to 2022, which would continue to outpace projected apparel and footwear average annualized market growth of ~1%.
- EBIT is expected to grow 5-6% on an average annualized basis from 2017 to 2022. EBIT margin of 6.1% in 2017 is expected to expand by 50 to 80 basis points by 2022.
- Adjusted ROIC in a mid-teens range from 9.7% last year.
- FCF $1 billion from $0.6 billion last year.
Analysts expected sales to grow just 2.5% next year, so the top-line projection looks fairly strong. The EBIT growth guidance of 5-6% is in-line with estimates for next year.
Recall, the stock got hit in May after first quarter same store sales grew just 0.6% (below peers) while the company said it will continue to invest in the business long-term.
More on the company's strategic focus (from the Investor Day):
Nordstrom said its customer strategy is centered on three strategic pillars: providing a compelling product offering, delivering outstanding services and experiences and leveraging the strength of the Nordstrom brand.
- The Company will address its market differentiation through its ability to connect Nordstrom's physical and digital capabilities seamlessly through its local market strategy. This positions Nordstrom to further engage and serve customers with the right product, in the right place and at the right time.
- Nordstrom is launching efforts to integrate these strategies in Los Angeles, its largest market, and looks forward to hosting the investment community there as part of its Investor Day activities.
The Company will also address its approach to increasing shareholder value through the execution of three key strategic objectives:
- Continuing market share gains through the Company's investments in new markets, its market-leading digital presence and core growth in its Full-Price and Off-Price businesses. Improving profitability and returns as Nordstrom expects to reach a pivotal year in achieving long-term profitable growth.
- Management will discuss plans to further scale and leverage its generational investments in new markets and digital capabilities. These drivers are expected to contribute to improving operating margins and Adjusted Return on Invested Capital (Adjusted ROIC).
- Maintaining disciplined capital allocation through increased capital efficiency and continued disciplined approach to capital investments. The Company expects accelerating free cash flow as generational investments mature.
KeyBanc downgraded the stock to Sector Weight this morning, so it is unclear how much of a role that is playing today in the stock. Underwhelming financial targets or a sell-the-news reaction could be the primary culprit for today's weakness in the stock.
At 15x earnings estimates, Nordstrom trades at a notable premium to lower end department Macy's (M) at 10x and Kohl's (KSS) at 13x.