Nordstrom: Strong 2014 earnings keep expansion plans on track (Part 9 of 9)
Overview
In the previous part of this series, we reviewed Nordstrom’s (JWN) performance in 4Q14 and the full year. This article covers Nordstrom’s stock performance and its valuation relative to others in the consumer discretionary sector. The Vanguard Consumer Discretionary ETF (VCR) has 0.37% of its holdings invested in Nordstrom.
Nordstrom stock performs
As of February 3, 2015, Nordstrom stock was trading at $80.70. Since 2014, the stock has appreciated by 30%, on par with its department store rival Kohl’s (KSS). Dillard’s (DDS) has outperformed all its peers in the department store category, appreciating by ~34% since 2014. Nevertheless, between 2014 and February 3, 2015, Nordstrom’s stock outperformed Macy’s (M), TJX Companies (TJX), the Consumer Discretionary Select Sector SPDR Fund (XLY), and the broader market represented by the S&P 500.
Relative valuation
Nordstrom is currently trading at a price-to-earnings, or PE, multiple of 20.9, almost on par with its off-price rival TJX Companies. The company’s valuation has increased by 38% since the beginning of 2014, when its PE multiple was 15.1. Nordstrom’s valuation is higher than Macy’s, Dillard’s, and Kohl’s, which are currently trading at PE multiples of 13.3, 14.9, and 16.2, respectively. Nordstrom’s valuation is also higher than the S&P 500 consumer discretionary sector and the market in general.
In fiscal 2014, Nordstrom’s sales increased by 7.7% to $13.5 billion, driven by the strong performance of Rack stores and that of its online channel. The company’s adjusted earnings per share increased by 0.3% to $3.72.
Nordstrom’s growth investments are expected to deliver strong results in the long term, although in the short term, the company’s earnings are feeling the pinch.
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