Nordstrom’s Valuation Is Upgraded Following 2Q15 Results
Nordstrom Outperforms Department Store Peers in 2Q15
Stock price movement
As of August 17, Nordstrom (JWN) was trading at a stock price of $79.04, up 0.9% since the beginning of 2015. The company’s stock price surged by 4.3% on August 14, following the announcement of 2Q15 results after the close of financial markets on August 13.
Macy’s (M) stock price has declined by 4.2% since the start of this year as the company posted disappointing results in the first half of 2015 and issued a bleak outlook for the year. JCPenney’s (JCP) share price increased by 41.8% over the same period as the company’s turnaround efforts showed results.
Performance so far
The company’s sales, including its credit card revenue, increased by 9.4% to $6.9 billion in the first half of fiscal 2015 on a year-over-year basis. Nordstrom’s e-commerce business and off-price Rack stores registered strong growth in 1H15. The company’s full-line stores in the United States registered a 1% growth in 1H15 sales. Adjusted EPS for 1H15 declined by 4.8% to $1.59 as the company’s growth investments hit a bottom line.
Nordstrom makes up 0.1% of the portfolio holdings in the SPDR S&P 500 ETF (SPY) and 1.1.% of the SPDR S&P Retail ETF (XRT).
Relative valuation
As of August 17, Nordstrom was trading at a forward PE (price-earnings) ratio of 19.9x, up 1.6% since the beginning of this year. As we discussed in parts 1 and 2 of this series, Nordstrom registered strong sales growth in 2Q15 and beat analyst sales and earnings estimates.
As of August 17, Macy’s and Kohl’s (KSS) were trading at forward PEs of 13.3x and 12.2x, respectively. Both Macy’s and Kohl’s disappointed investors with their performance in 2Q15. Off-price retailers TJX Companies (TJX) and Ross Stores (ROST) were trading at forward PEs of 20.5x and 20.9x, respectively, on August 17. Both TJX Companies and Ross Stores posted strong sales growth in 2Q15.
Nordstrom’s higher valuation also reflects the company’s positive outlook for fiscal 2015. We discuss this in the next part of our series.
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