Q4 Preview: Analysts Fear Margin Contraction Going into Nordstrom (JWN) Results

Shares of Nordstrom Inc. (NYSE: JWN) are trading up nearly 2 percent Thursday ahead of the release of its fourth-quarter results after the closing bell.

The Wall Street quarterly consensus for Nordstrom Inc. is $1.10 per share in earnings on $3.17 billion in sales. During the fourth quarter of last year, the company reported earnings of $1.04 per share on $2.82 billion in total sales.

For the full year 2011, analysts on the Street are currently estimating $3.13 per share in earnings on $10.57 billion in total sales.

The fourth quarter conference call is scheduled for 4:45pm ET.

According to data from Bloomberg, shares of Nordstrom Inc. have 12 Buy ratings, 10 Hold ratings and three Sell ratings. The average price target on shares of JWN is $54 with a range from $42 to $61.

Analyst Comments:

• Goldman Sachs forecasts the company will miss expectations and report earnings of $1.07 for the quarter. The firm noted the miss will be largely attributed to weaker margins; Goldman estimates a 139 basis point decline.
  
  Goldman anticipates management will offer low single-digit comp guidance, which will be inline with the consensus of a 3.6 percent growth. An analyst at the firm commented, “The combination of tough comparisons and ongoing investments likely prompts them to set guidance that places consensus at the high end of the range.”
  
  Goldman reaffirmed its $51 price target and Neutral rating on the company.
  
  
• JPMorgan also believes Nordstrom’s earnings for the quarter will come in below expectations, but noted a high level of uncertainty given the company’s track record of SG&A investments. For the quarter, the firm forecasts earnings will come in at $1.09 per share as EBIT margin will contract by 124 basis points and gross margin will shink by 7 basis points.
  
  “We believe focus in the quarter will be on the company’s margins, particularly gross margin and the impact of the company’s free shipping offer and on the SG&A line as we expect management to outline further investments to build the online growth platform,” reports an analyst at JPMorgan. In its 4Q earnings release, we expect management to provide conservative 2012 EPS, given an uncertain environment as investors are fully aware, but also due to heavy investing in initiatives for the future of the business.”
  
  JPMorgan reiterated its Neutral rating and $55 price target.
  
  
• An analyst at Deutsche Bank commented, “The consensus trade on JWN, in our view, is to avoid the stock into its Q4 print on concerns regarding upcoming investments and conservative ’12 guidance. At current levels and with these two issues more than well advertised, we would look to go the other way given the stock has lagged YTD despite solid top-line trends.”
  
  For the quarter, the firm forecasts earnings will total $1.11 per share.
  
  Deutsche maintains its Buy rating and $55 price target on Nordstrom.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Lowe's (LOW) PT Lowered to $275 at Guggenheim
• JPMorgan Downgrades Rockwool (ROCKB:DC) (RKWBF) to Neutral
• Wells Fargo Upgrades Portland General Electric Company (POR) to Overweight