Nordstrom, Inc. (JWN – Free Report) , emerges as an attractive value opportunity in the Retail – Apparel and Shoes industry, trading at a forward 12-month price-to-earnings ratio of 12.20X, below the industry average of 20.44X and the Retail-Wholesale average of 25.17X. The stock is undervalued compared with its industry peers, offering compelling value to investors looking for exposure to the Retail-Wholesale sector.
JWN P/E Performance
Image Source: Zacks Investment Research
The Seattle-based fashion retailer, JWN’s stock is currently priced at $24.22, trading at a 3.1% discount from its 52-week high of $24.99 reached on Nov. 25, 2024. The stock is currently trading above its 200-day and 50-day moving averages of $23.24 and $21.66, respectively, highlighting a sustained upward trend.
Nordstrom’s shares have experienced an impressive rally of 6.6% over the past month, driven by solid third-quarter fiscal 2024 results reported on Nov. 26, 2024. This performance stands out compared to the broader industry, which delivered a 5.1% return during the same period, and the Retail-Wholesale sector, which gained 1.8%.
JWN Price Performace in the Past Month
Image Source: Zacks Investment Research
Nordstrom Gains From Strategic Priorities & Innovation
JWN has been focused on smoothly advancing its three key priorities: driving growth in the Nordstrom banner, optimizing operations and boosting momentum at Nordstrom Rack. These efforts are centered on faster delivery, efficient inventory management and enhancing customer experience to drive productivity.
Nordstrom’s strategic initiatives to strengthen the Rack banner are yielding positive results. Improvements in brand penetration and supply chain optimization have bolstered the Rack’s performance, with the banner reporting notable sales growth. Management remains confident in the company’s brand strength and ability to deliver long-term value to its shareholders while achieving profitable growth.
In the third quarter of fiscal 2024, Nordstrom’s offerings resonated well with customers, contributing to net sales growth for the fourth consecutive quarter. Women’s apparel and activewear recorded double-digit growth, while shoes, men’s apparel and kids’ categories increased in the mid-to-high single digits year over year.
Nordstrom continues to strengthen its digital capabilities, driving growth and enhancing customer engagement through expanded assortments, improved search tools and high in-stock availability. Despite a timing shift in the Anniversary Sale slightly impacting performance, digital sales remain a significant contributor, accounting for a large portion of total sales.
The company is leveraging technology to streamline operations, improve inventory management and provide a seamless shopping experience with faster delivery and personalized services. Its ongoing digital transformation, including the adoption of generative AI solutions, underscores Nordstrom’s commitment to innovation and positions the brand to meet evolving consumer preferences.
What Could Derail the JWN Stock’s Momentum?
Despite its strong performance and strategic initiatives, Nordstrom has been operating in a tough macroeconomic landscape, with volatile consumer behavior and inflation being the major concerns. Nordstrom has updated its financial expectations for fiscal 2024. This reflects the accelerated technology depreciation impacts, likely to be seen in the fourth quarter of fiscal 2024.
Although the company’s revised outlook suggests an improvement from the prior forecast, it remains soft. It now expects total revenues, including retail sales and credit card revenues, to be flat to increase 1% compared with the prior estimate of down 1% to up 1%. This view includes about 135 basis points of adverse impacts of the 53rd week.
The extra week benefited fourth-quarter sales by 460 basis points in the prior fiscal year. Management now envisions comparable sales to increase 1-2% compared with 52 weeks in fiscal 2023. Earlier, it anticipated comps to be flat to up 2%. The company expects adjusted EBIT between 3% and 3.4% compared with the prior estimate of 3.6-4%. Our model expects EBIT for FY24 to be 3.7%.
Final Thought on JWN Stock
The JWN stock appears appealing to investors due to its undervaluation relative to industry peers and its strategic initiatives that support long-term growth. Nordstrom’s strategic initiatives to strengthen the Rack banner are yielding positive results. The company’s three strategies are key drivers of growth. However, challenges such as a tough macroeconomic landscape, with volatile consumer behavior and inflation being the major concerns. While Nordstrom’s fiscal 2024 guidance suggests progress, these headwinds could weigh on near-term performance. Currently, the company has a Zacks Rank #3 (Hold), reflecting a balanced outlook for its future performance.
Three Picks You Can’t Miss
We have highlighted three better-ranked companies, namely, The Gap, Inc. (GAP – Free Report) , Abercrombie & Fitch Co. (ANF – Free Report) and Gildan Activewear Inc. (GIL – Free Report) .
Gap, a leading apparel retailer, sports a Zacks Rank #1 (Strong Buy) at present. GPS has a trailing four-quarter earnings surprise of 101.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GPS’ current financial-year sales and earnings suggests declines of 0.8% and 41.3%, respectively, from the year-ago reported figures.
Abercrombie & Fitch, a specialty retailer of premium, high-quality casual apparel, currently flaunts a Zacks Rank #1. ANF has a trailing four-quarter average earnings surprise of 14.8%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales and earnings indicates growth of 15.01% and 69.3%, respectively, from the prior-year levels.
Gildan Activewear, a distributer and manufacturer of activewear products, presently carries a Zacks Rank #2 (Buy). GIL has a trailing four-quarter earnings surprise of 5.4%, on average.
The Zacks Consensus Estimate for Gildan Activewear’s current fiscal-year sales and earnings suggests an improvement of 1.5% and 15.6%, respectively, from the year-earlier levels.
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