Nordstrom shares climb on unexpected profit results

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to… read more.
on Dec 27, 2020
Updated: Dec 28, 2020
  • The American department store chain reported earnings of 34 cents a share for its Q3
  • Revenue fell by 16% to $3.1 billion vs analysts’ expectations of $3.13 billion
  • After soaring more than 110% in November, Nordstrom stock price has continued to trade higher this month

Shares of Nordstrom (NYSE: JWN) are up 17% in December after reporting good results for the third quarter.

Fundamental analysis: New customers attracted

The American department store chain reported earnings of 34 cents a share, while its revenue plunged 16% to $3.1 billion. This is against analysts’ expectations for revenue of $3.13 billion.

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Nordstrom said its digital sales surged by 37% year-on-year to $1.6 billion, or 54% of its total sales. Nordstrom sales plunged by 7% at its full-price stores, while sales at its Rack unit lost 32%

However, the company said Nordstrom Rack continues to attract the majority of new customers whose inventory was recently integrated with its omnichannel platform. 

As for its Anniversary Sale, Nordstrom said its digital sales climbed by about 1%, recording a similar performance like in the first half of 2019. Full-price sales plummeted excluding the sale’s effects, while gross profits as a percentage of sales fell by 1.5 percentage points, due to the delay of the sale and slashed sales volumes. 

On the other hand, the company has seen a ray of hope after the coronavirus vaccine breakthrough, with some analysts growing slightly more optimistic about the company’s outlook.

“We see COVID-19 accelerating JWN and department store sub-sector market share losses as consumers increasingly shop brands directly online, shop less physically in mall-based stores and increase their focus on convenience and value. That said, we note JWN is relatively better positioned than department store peers given higher e-commerce penetration (=one-third of sales in 2019 > peers ~20%),” said Matthew Boss, an analyst at JPMorgan, in a note.

Technical analysis: Strong recovery continues

After soaring more than 110% in November, Nordstrom stock price has continued to trade higher in December, being up about 17% so far. This move higher has pushed the price action above the descending trend line.

Nordstrom monthly chart (TradingView)

This bullish brake is likely to provide a basis for the stock to continue moving higher in the short-term. In this context, the horizontal resistance at $35 offers nearby resistance. 

Summary

Nordstrom’s stock moved up by roughly 4.7% after the company reported better-than-expected profit results for the third quarter.

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