Deutsche Bank Starts Nordstrom (JWN) at Buy; 2H11 EPS Outlook Has Pockets of Conservatism

Deutsche Bank initiates coverage on Nordstrom (NYSE: JWN) with a Buy. PT $55.00.

Deutsche analyst says, "Within the context of our Double Barbell Investment Strategy and today's uncertain macro outlook, we feel it's prudent to be aligned with retailers with structural advantages. Given its (1) variable cost model, (2) limited promotional reliance, (3) healthy b-sheet, (4) upscale targeted demographic, (5) greater product differentiation vs. peers, and (6) multi-channel model—Nordstrom fits this classification. Accordingly, we are initiating coverage with a Buy."

"We are modeling FY11 EPS of $3.15, but we do believe material upside is possible: (1) JWN’s SSS 2H outlook implies a 800 bp drop from 1H on a 2-year. basis; (2) 2H EBIT flow through is below its 25-35% target (including Hautelook); (3) GPM are set to be up modestly after rising 80 bps in 1H; (4) credit reserves are set higher than what might be necessary; and (5) buybacks are excluded."

For more ratings news on Nordstrom click here and for the rating history of Nordstrom click here.

Shares of Nordstrom closed at $45.92 yesterday.

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