Nordstrom (NYSE:JWN) Posts Better-Than-Expected Sales In Q4 But Stock Drops

Jabin Bastian /
2024/03/05 4:46 pm EST

Luxury department store chain Nordstrom (NYSE:JWN) reported Q4 FY2023 results beating Wall Street analysts' expectations, with revenue up 2.3% year on year to $4.42 billion. It made a non-GAAP profit of $0.96 per share, improving from its profit of $0.74 per share in the same quarter last year.

Is now the time to buy Nordstrom? Find out by accessing our full research report, it's free.

Nordstrom (JWN) Q4 FY2023 Highlights:

  • Revenue: $4.42 billion vs analyst estimates of $4.38 billion (0.9% beat)
  • EPS (non-GAAP): $0.96 vs analyst expectations of $0.89 (7.7% beat)
  • Guidance for full year EPS (non-GAAP): $1.85 vs analyst expectations of $1.97 (6.1% miss)
  • Free Cash Flow of $285 million, down 48.9% from the same quarter last year
  • Gross Margin (GAAP): 36.3%, up from 35% in the same quarter last year
  • Store Locations: 359 at quarter end, increasing by 1 over the last 12 months
  • Market Capitalization: $3.34 billion

"We delivered on our 2023 guidance and are confident in our expectations for continued sales improvement and sustained profitability in 2024," said Erik Nordstrom, chief executive officer of Nordstrom,

Known for its exceptional customer service that features a ‘no questions asked’ return policy, Nordstrom (NYSE:JWN) is a high-end department store chain.

Department Store

Department stores emerged in the 19th century to provide customers with a wide variety of merchandise under one roof, offering a convenient and luxurious shopping experience. They played an important role in the history of American retail and urbanization, and prior to department stores, retailers tended to sell narrow specialty and niche items. But what was once new is now old, and department stores are somewhat considered a relic of the past. They are being attacked from multiple angles–stagnant foot traffic at malls where they’ve served as anchors; more nimble off-price and fast-fashion retailers; and e-commerce-first competitors not burdened by large physical footprints.

Sales Growth

Nordstrom is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.

As you can see below, the company's revenue has declined over the last four years, dropping 1.4% annually as its store count shrunk.

Nordstrom Total Revenue

This quarter, Nordstrom grew its revenue by 2.3% year on year, and its $4.42 billion in revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefitting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.

Number of Stores

A retailer's store count often determines on how much revenue it can generate.

When a retailer like Nordstrom keeps its store footprint steady, it usually means that demand is stable and it's focused on improving operational efficiency to increase profitability. At the end of this quarter, Nordstrom operated 359 total retail locations, in line with its store count 12 months ago.

Nordstrom Operating Retail Locations

Taking a step back, the company has kept its physical footprint more or less flat over the last two years while other consumer retail businesses have opted for growth. A flat store base means that revenue growth must come from increased e-commerce sales or higher foot traffic and sales per customer at existing stores.

Key Takeaways from Nordstrom's Q4 Results

We were glad its revenue, gross margin, and adjusted EPS outperformed Wall Street's estimates. On the other hand, its full-year earnings forecast missed analysts' expectations. The weak outlook is likely the culprit driving down the stock price. Overall, the results could have been better. The company is down 10% on the results and currently trades at $18.8 per share.

Nordstrom may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.