Dj Nordstrom Inc. Stock Outperforms Competitors On Strong Trading Day

The retail sector is in focus with big retailers like Home Depot HD, Lowe’s LOW, Wal-Mart WMT and Target TGT, as well as store channels like Nordstrom JWN and Kohl’s KSS, due to report earnings.

So far, 23 out of 34 retailers on the S&P 500 Index have already reported. Earnings of these companies are up 17.3% from the same period last year on 6.3 higher revenues, with 52.2% beating EPS estimates and 47.8% beating revenue estimates. Overall, the retail sector is expected to report earnings growth of 18% on 6.3% revenue growth.

Given this, traditional retail ETFs are in focus. SPDR S&P Retail ETF XRT and VanEck Vectors Retail ETF RTH have gained nearly 5% each over the past month.

Stay up-to-date with all quarterly releases:See Zacks Earnings Calendar.

What Our Model Unveils for Retailer Earnings

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Home Depot has an Earnings ESP of +4.09% and a Zacks Rank #2. The company saw a positive earnings estimate revision of a penny over the past seven days for the to-be-reported quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The company delivered an average earnings surprise of 1.64% in the last four quarters. Home Depot is scheduled to report on Nov. 12, before market open.

Lowe’s has an Earnings ESP of +2.00% and a Zacks Rank #3. The company saw no earnings estimate revision for the to-be-reported quarter over the past 30 days and delivered an earnings surprise of 3.33%, on average, in the last four quarters. LOW is slated to report earnings on Nov. 19.

Wal-Mart has an Earnings ESP of +1.61% and a Zacks Rank #2. The company saw no earnings estimate revision over the past 30 days for the to-be-reported quarter. Wal-Mart delivered an average four-quarter earnings surprise of 6.89%. Wal-Mart is scheduled to report on Nov. 19, before market open (see: all the Consumer Discretionary ETFs here).

Target has an Earnings ESP of +0.73% and a Zacks Rank #2. The company saw no earnings estimate revision over the past month for the to-be-reported quarter. It delivered an earnings surprise of 20.26% for the last four quarters. Target will report earnings on Nov. 20, before the opening bell.

Nordstrom has an Earnings ESP of 0.00% and a Zacks Rank #3. It saw no earnings estimate revision for the to-be-reported quarter over the past 30 days. The company delivered a negative earnings surprise of 17.82%, on average, over the past four quarters. It is scheduled to report earnings on Nov. 26 after the closing bell.

Kohl’s has an Earnings ESP of -2.07% and a Zacks Rank #2. It saw no earnings estimate revision for the to-be-reported quarter in the past month. Kohl’s delivered a negative average earnings surprise of 145.30% in the last four quarters. The company is slated to report before the opening bell on Nov. 26.

ETFs in Focus

SPDR S&P Retail ETF (XRT)

SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large-, mid- and small-cap stocks. It holds 78 well-diversified stocks in its basket, with none making up for more than a 2.3% share. Additionally, SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in automotive retail, specialty retail, apparel retail and broad-line (read: Will Trump's Tariffs Fuel Inflation? ETFs in Focus).

SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $382.5 million and an average trading volume of 4 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

VanEck Vectors Retail ETF (RTH)

VanEck Vectors Retail ETF provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. VanEck Vectors Retail ETF is highly concentrated on the top firm with nearly 21% exposure, while the other firms hold no more than 9% share.

VanEck Vectors Retail ETF has amassed $228.5 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 2,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 with a Medium risk outlook.

Zacks Investment Research

Shares of Nordstrom, Inc. JWN have surged 77.2% in the past year, outperforming the Zacks Retail - Apparel and Shoes industry’s 23.2% growth, the broader Retail-Wholesale sector’s 37.9% increase and S&P 500 index’s 38.7% growth. JWN is strictly focused on driving Nordstrom banner growth, optimizing operations and building momentum at Rack. Digital efforts are also underway.

Let’s delve deeper.

Analyzing JWN’s Core Strengths

Nordstrom has been expanding its Rack banner by increasing the brand penetration. It looks to strengthen Rack’s productivity throughout its network, reduce transportation costs and delivery times and enhance services via faster delivery. The company continues to focus on introducing more premium brands at Rack, better assortment and increased brand awareness. The Rack banner's digital channel is a differentiator to the off-price retail.

JWN has been making efforts to change the storage and access of data. This transformational change looks to improve data access and analysis capabilities, hence enhancing the ability to leverage generative AI solutions and services at a higher pace. In the most recent quarter, digital momentum continued with sales growth of 6% year over year. Growth at nordstrom.com was backed by an increase in the assortment across a balance of price points, improvements in search and discovery and high in-stock rates of its fastest-turning items.

The company has also been making notable efforts to drive efficiency and enrich the customer experience. It is redefining its flagship brand to give it a trendy look, offering a style-driven and top-quality assortment. Increased focus on distribution capabilities and improved connectivity of physical and digital inventory are other tailwinds.

Nordstrom is focused on its long-term strategy, which builds on its market strategy to capitalize on its digital-first platform to better serve customers, gain market share and deliver profitable growth. It concentrates on winning in the most important markets, expanding the reach of Nordstrom Rack and enhancing its digital velocity. JWN’s closer-to-you strategy, which aims to link stores and services to expedite deliveries, expand online offerings and add cheaper merchandise at its Rack off-price stores, bodes well. Such catalysts aim at generating $2 billion in revenues in the long term.

JWN Stock’s Valuation

Nordstrom stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, JWN stock is currently trading at 11.96 on a forward 12-month basis, lower than 16.09 of the industry.

Nordstrom Well Poised for Success

Nordstrom’s robust strategies, including sturdy momentum at its Rack banner and digital endeavors, position it well for success. Its long-term growth strategies coupled with the stock’s attractive valuation further demonstrate strength. The company currently carries a Zacks Rank #2 (Buy).

Other Key Picks

We have highlighted three other top-ranked stocks, namely Boot Barn BOOT, Abercombie ANF and Deckers DECK.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The company has a trailing four-quarter earnings surprise of 6.8%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 13.9% from the year-ago figure.

Abercrombie, a leading casual apparel retailer, currently carries a Zacks Rank of 2. ANF delivered an earnings surprise of 16.8% in the last reported quarter.

The consensus estimate for Abercrombie’s current financial-year sales indicates growth of 13% from the year-ago figure.

Deckers, a footwear and accessories dealer, currently carries a Zacks Rank of 2. DECK delivered an earnings surprise of 41.1% in the trailing four quarters.

The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 13.7% from the year-ago figure.

Zacks Investment Research

Tapestry, Inc. TPR reported first-quarter fiscal 2025 results, which exceeded the Zacks Consensus Estimate for revenues and earnings despite a challenging global economic and consumer environment. The top line declined while the bottom line increased year over year. Driven by the first quarter results, Tapestry raised its fiscal 2025 outlook.

Tapestry's first-quarter results reflected the company's brand strength and operational excellence that support its strategic growth initiatives. This performance highlighted the effective efforts, which successfully engaged consumers through innovative products, compelling experiences and strong storytelling.

The company is positioned for continued growth, supported by its distinctive brands, a flexible platform and solid cash flow. These factors provide Tapestry with both strategic and financial flexibility, enabling it to pursue accelerated organic growth and long-term value creation, particularly in fiscal 2025 and beyond.

Tapestry, Inc. Price, Consensus and EPS Surprise

Tapestry, Inc. price-consensus-eps-surprise-chart | Tapestry, Inc. Quote

More on TPR’s Q1 Financial Results

Tapestry reported adjusted earnings of $1.02 per share for the first quarter, which surpassed the Zacks Consensus Estimate of 95 cents and increased from 93 cents delivered in the prior-year period.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Net sales reached $1,507.5 million, beating the consensus estimate of $1,474 million. However, the figure reflected a 0.4% year-over-year decline. The appreciation of the U.S. dollar caused a 40-basis point headwind in the quarter due to foreign exchange (FX) impacts.

In the first quarter, Tapestry acquired approximately 1.4 million new customers in North America, with growth across all of its brands. Notably, more than half of these new customers were Gen Z and Millennials, aligning with Tapestry’s strategy to attract younger consumers, demonstrating the success of its initiatives.

For the quarter, Coach's net sales were $1.17 billion, which was better than the Zacks Consensus Estimate of $1.14 billion. The figure increased 1% year over year.

Kate Spade’s sales were $283.2 million, came below the consensus estimate of $285.8 million, marking a 6.6% decline from the year-ago period.

Stuart Weitzman’s net sales totaled $53.7 million, which was better than the consensus estimate of $49.3 million. The figure marked 2.1% growth year over year.

Tapestry’s Q1 Revenue Insights by Region

Sales in North America declined 1% year over year to $948.2 million owing to a tough consumer environment. Sales in Greater China dropped 4% to $234.1 million.

In Japan, sales decreased 8% to $117.1 million, while revenues from Other Asian markets rose 11% to $86.8 million. European markets continued to show momentum, with a 27% increase in revenues to $94.3 million, thanks to robust spending from local consumers and tourists.

TPR’s Margins & Costs Details

The consolidated gross profit was $1.13 billion, up 3.4% from the year-ago period. Also, the gross margin increased 280 basis points to 75.3%. This was driven by a 180-basis point improvement in operations, a 60-basis point benefit from reduced freight expenses and favorable FX impacts.

The company reported an adjusted operating income of $285 million, up from $273 million in the year-ago period. Meanwhile, the adjusted operating margin increased 90 basis points to 18.9%.

Adjusted Selling, General & Administrative (SG&A) expenses totaled $850 million, up from $825 million in the year-ago period. As a percentage of net sales, this metric deleveraged 190 basis points to 56.4%.

Tapestry’s Q1 Store Update

As of the end of the quarter, Tapestry operated 325 Coach stores, 197 Kate Spade outlets and 34 Stuart Weitzman stores in North America. Internationally, the store count was 594, 178 and 60 for Coach, Kate Spade and Stuart Weitzman, respectively.

TPR’s Financial Snapshot: Cash, Debt and Equity Overview

Tapestry ended the quarter with cash, cash equivalents and short-term investments of $7.31 billion, long-term debt of $7 billion and stockholders' equity of $2.98 billion.

Operating cash flow as of Sept. 28, 2024, amounted to $119.5 million, up from $75.3 million in the previous-year period. Free cash flow was $94 million, up from $54 million in the prior year. This included $30 million in capital expenditures and implementation costs related to cloud computing compared with $29 million in the previous year.

Tapestry’s Guidance

Tapestry has raised its fiscal 2025 outlook, now expecting revenues of more than $6.75 billion, which represents growth of approximately 1% to 2% compared with the prior year on both a reported and constant currency basis. This is ahead of the previous guidance of $6.7 billion, which anticipated slight growth on a reported basis and around 1% growth on a constant currency basis.

Regionally, at constant currency, expectations include high-teens growth in Europe, where Tapestry has significant potential for further market penetration and mid-single-digit growth in other parts of Asia. Japan is forecasted to see a slight revenue decline, while North America is expected to be roughly stable to slightly higher than the prior year, reflecting ongoing support for a healthy business environment. In Greater China, revenues are expected to remain consistent with last year.

Operating margin is anticipated to expand by about 50 basis points from the prior year, driven by gross margin improvements tied to increases in both average unit retail and average unit cost. The impacts of freight and foreign exchange are expected to be minimal on gross margins for fiscal 2025.

SG&A expenses are expected to increase in line with revenue growth, with focused investments in high-impact growth areas, including enhanced marketing efforts. Corporate expenses are anticipated to see a slight decline from the prior-year figure as Tapestry continues to prioritize cost control while supporting brand growth.

Management guided fiscal 2025 earnings per share between $4.50 and $4.55, reflecting mid-single-digit growth compared with the previous year and an increase from the prior range of $4.45-$4.50. Free cash flow is forecasted to be around $1.1 billion, excluding deal-related costs.

Tapestry anticipates slight growth in constant currency sales in the first half of the year, with low single-digit growth planned for the latter half. In the second quarter specifically, sales are expected to rise 1% to 2% on both a reported and constant currency basis.

Operating margin expansion is expected across both halves of the year, initially driven by gross margin gains in the first half and SG&A leverage in the second half. This balanced approach is expected to result in mid-single-digit earnings per share (EPS) growth for both halves of the fiscal 2025, with the metric estimated to reach approximately $1.70 in the second quarter.

Shares of this Zacks Rank #3 (Hold) company have gained 34.8% in the past three months compared with the industry’s growth of 1%.

Key Picks

Some better-ranked stocks in the same space are The Gap, Inc. GAP, Nordstrom Inc. JWN and Abercrombie & Fitch Co. ANF.

The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The Zacks Consensus Estimate for The Gap’s fiscal 2024 earnings and sales indicates growth of 31.5% and 0.5%, respectively, from the year-ago actuals. GAP has a trailing four-quarter average earnings surprise of 142.8%.

Nordstrom is a leading fashion specialty retailer in the United States. The company offers an extensive selection of both branded and private-label merchandise. It currently has a Zacks Rank of 2.

The Zacks Consensus Estimate for Nordstrom’s fiscal 2024 sales indicates growth of 0.6% from the reported figure of fiscal 2023. JWN has a negative trailing four-quarter average earnings surprise of 17.8%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. It carries a Zacks Rank of 2 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.

The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 63.4% and 13%, respectively, from the fiscal 2024 actuals. ANF has a trailing four-quarter average earnings surprise of 28%.

Zacks Investment Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Nordstrom (JWN). JWN is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 11.78, which compares to its industry's average of 15.67. Over the last 12 months, JWN's Forward P/E has been as high as 13.36 and as low as 6.56, with a median of 11.25.

Another valuation metric that we should highlight is JWN's P/B ratio of 3.91. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 4.37. JWN's P/B has been as high as 4.65 and as low as 2.91, with a median of 3.90, over the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. JWN has a P/S ratio of 0.25. This compares to its industry's average P/S of 0.47.

Finally, we should also recognize that JWN has a P/CF ratio of 3.28. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 12.66. JWN's P/CF has been as high as 3.82 and as low as 2.45, with a median of 3.25, all within the past year.

Investors could also keep in mind Tapestry (TPR), an Retail - Apparel and Shoes stock with a Zacks Rank of # 2 (Buy) and Value grade of A.

Shares of Tapestry are currently trading at a forward earnings multiple of 10.99 and a PEG ratio of 1.83 compared to its industry's P/E and PEG ratios of 15.67 and 1.32, respectively.

Over the past year, TPR's P/E has been as high as 11.16, as low as 6.45, with a median of 9.22; its PEG ratio has been as high as 1.86, as low as 0.56, with a median of 2.20 during the same time period.

Tapestry sports a P/B ratio of 4 as well; this compares to its industry's price-to-book ratio of 4.37. In the past 52 weeks, TPR's P/B has been as high as 4.19, as low as 2.61, with a median of 3.42.

These are just a handful of the figures considered in Nordstrom and Tapestry's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that JWN and TPR is an impressive value stock right now.

Zacks Investment Research