Premium retail department store chain Nordstrom (NYSE: JWN)
stock was pummeled on its Q2 2021 earnings release presenting a possible opportunity for value investors. Supply chain
worries and work-at-home
stickiness fears were some of the drivers behind the harsh sell-off in shares of the iconic department store
chain. While the Company is seeing a recovery
from the reopening
that is accelerating sales back towards 2019 levels, there are concerns from investors regarding its discounting especially with its Anniversary Sales and the potential cannibalization between its Nordstrom Rack eating into the premium Nordstrom products despite the acceleration of COVID-19 vaccinations
. Nonetheless, the Company raised fiscal full-year 2022 guidance, and the negative (over) reaction on the shares especially in comparison to rival Macy’s (NYSE: M)
blowout quarter may be overdone. Prudent investors seeking exposure at a discount in the retail recovery can watch for opportunistic pullbacks in shares of Nordstrom ahead of the holiday shopping season.
Q2 FY fiscal 2021 Earnings Release
On Aug. 24, 2021, Nordstrom released its second-quarter fiscal 2021 results for the quarter ending July 2021. The Company reported earnings-per-share (EPS) of $0.49 excluding non-recurring items versus consensus analyst estimates for a profit of $0.30, a $0.19 per share beat. Revenues rose 96.4% year-over-year (YoY) to $3.66 billion, beating consensus analyst estimates for $3.33 billion. Nordstrom brand net sales rose 127% YoY but fell (-5%) on a two-year basis. Digital sales rose 30% YoY and 24% on a two-year basis.
Nordstrom CEO Eric Nordstrom stated, "Our second-quarter results demonstrate the strength of our two brands, the power of our 'closer to you' strategy and the success of our iconic Anniversary Sale," said Erik Nordstrom, chief executive officer of Nordstrom, Inc. "We capitalized on improving customer demand with focused execution, healthy inventory sell-through and continued expense management to deliver strong quarterly results. We remain focused on executing our strategy to win in our most important markets, broaden the reach of Nordstrom Rack and increase our digital velocity, and are well-positioned for continued progress toward our long-term strategic and financial goals as we look ahead to the second half of the year."
Raised fiscal 2022 Guidance
The Company raised full-year fiscal 2022 revenue growth to over 35%, which is between $14.46 billion versus $13.81 consensus analyst estimates. This guidance was up from prior guidance of more than 25% growth.
Conference Call Takeaways
CEO Nordstrom set the tone, “We’ve now had four consecutive quarters of sequential improvement in sales trends for both our Nordstrom and Nordstrom Rack banners, with active customer counts continuing to recover and approaching 2019 levels. Customers are increasingly engaging with us both in-store and online, as evidenced by continuing improvements in our store traffic and sales, along with robust digital growth. Our loyalty program remains a powerful engagement driver, with loyalty club members contributing 70% of our Q2 sales, up 500 basis points from 2019. We are very pleased with the performance of our Anniversary Sale with total event sales increasing 1% over 2019, including the final week of the event which fell in the third quarter. As always, our Anniversary Sale rewards and engages our loyal customers with brand new product at reduced prices for a limited time. The event was well-timed to serve increasing customer demand for wardrobe refreshes as they returned to activities outside the home.”
CEO Nordstrom touched upon its discount brand, “Our second growth priority is broadening the reach of Nordstrom Rack. In the quarter, total Rack sales declined 8% compared to 2019, a nearly 5 percentage point sequential improvement from the first quarter. Despite challenges with inventory flow, we are encouraged by the early results of our merchandise repositioning efforts, with price-oriented offerings in Active, Home, and Kids delivering a combined double-digit sales increase in those categories. And in the 70 Rack stores that have been repositioned for a price-oriented offering, new-to-Nordstrom customer counts increased 16% over 2019. Going forward, we are committed to building on this progress by continuing to expand our Rack offering and delivering an assortment that appeals to a wider set of customers while deepening our offering for our core customers.”
JWN Opportunistic Pullback Price Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for JWN stock. The weekly rifle chart formed a bearish inverse pup breakdown with a falling 5-period moving average (MA) just under the $31.09 Fibonacci (fib) level. The weekly stochastic has crossed back down with a mini inverse pup falling down through the 20-band. The weekly lower Bollinger Bands (BBs) sit at $24.62. The daily rifle chart has an inverse pup with a falling 5-period MA at $27.17 smothering each rally attempt which is causing the daily stochastic to stay smothered under the 20-band for weeks. This implies extreme oversold conditions as the daily lower BBs sit at $21.41. The daily market structure (MSH) sell triggered on the breakdown below $30.84. The old daily market structure low (MSL) buy triggers on a breakout above $35.33. However, watch for a new daily MSL trigger once a higher low forms on the day. Opportunistic pullback levels sit at the $26.56 fib, $25.54 sticky 5s level, $24.31 fib, $23.75 level, $22.40 sticky 2.50s level, and the $20.53 fib. Upside trajectories range from the $31.09 fib to the $44.25 fib level.
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