It has been about a month since the last earnings report for Nordstrom (JWN Quick QuoteJWN - Free Report) . Shares have lost about 23.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Nordstrom due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Nordstrom Q3 Earnings & Sales Beat Estimates, Down Y/Y

Nordstrom posted impressive third-quarter fiscal 2022 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. However, both metrics fell from the year-ago quarter’s readings. Results gained from strength in core categories in men's and women's apparel and shoes, as customers returned to occasions, travel, work and holidays. Also, it remains on track with the Closer to You strategy, as well as supply-chain-optimization efforts.

However, demand decelerated in late June, inducing Nordstrom to right-size its inventory and expenses in response to the current macroeconomic environment.

Quarterly Highlights

Nordstrom posted adjusted earnings of 20 cents per share, down from the year-ago fiscal quarter’s 39 cents. However, the metric surpassed the Zacks Consensus Estimate of 14 cents per share.

Total revenues of $3,546 million beat the Zacks Consensus Estimate of $3,521 million for the ninth straight quarter. However, the metric declined 2.5% from the year-ago fiscal quarter’s figure due to the shift in the timing of the Anniversary sale, wherein a day of the sale was part of the third quarter of 2022. This had a 200-bps negative impact on sales.

Net sales fell 2.9% from the year-ago fiscal quarter’s tally to $3,433 million and lagged our estimate of $4,373.1 million. Credit Card net revenues grew 9.7% from the prior-year fiscal quarter’s level to $113 million and came ahead of our estimate of $104.7 million.

For third-quarter fiscal 2022, net sales for the Nordstrom brand decreased 3.4% from the year-ago fiscal quarter’s number to $2,264 million and fell below our estimate of $3,106.7 million.

Sales for the Nordstrom Rack brand dipped 1.9% from the year-ago fiscal quarter’s level to $1,169 million and lagged our estimate of $1,307.9 million. This was mainly due to muted demand, particularly from lower-income customers. As a result, Nordstrom Rack reduced store-based order fulfillment and raised the minimum order amount for free ship-to-store delivery on rack.com. These actions led to lesser order cancellations, simplified rack operations and improved profitability. Going ahead, it continues focusing on introducing more premium brands at Rack, better assortment and increased brand awareness.

Digital sales plunged 16.4% from the year-ago fiscal quarter’s reading due to the shift in the timing of the Anniversary Sale, which had a 300-bps headwind on digital sales. For the fiscal third quarter, digital sales represented 34% of net sales. Also, the metric was hurt by a channel shift as customers return to store shopping.

Nordstrom's gross profit margin contracted 190 basis points (bps) from the year-ago fiscal quarter’s actuals to 33.2% for the reported quarter due to higher markdowns.

SG&A expense, as a percentage of sales, expanded 200 bps to 36.4% due to supply-chain technology and a related asset impairment charge, partly offset by reduced fulfillment expense. Adjusted selling, general and administrative (SG&A) expenses, as a percentage of sales, were flat with the year-ago fiscal quarter’s level at 34.3% for the fiscal third quarter.

Earnings before interest and taxes (EBIT) of $3 million reflected growth from $127 million in the year-ago fiscal quarter. The decrease mainly resulted from higher markdowns, supply-chain technology and a related asset impairment charge, offset by fulfillment expense efficiencies. Adjusted EBIT was $73 million, down 42.5% from the year-ago fiscal quarter’s reading in the reported quarter.

Other Financials

Nordstrom ended third-quarter fiscal 2022 with available liquidity worth $993 million as of Oct 29, 2022, including $293 million of cash and cash equivalents. It had long-term debt (net of current liabilities) of $2,855 million and total shareholders’ equity of $606 million.

As of Oct 29, 2022, JWN provided $240 million of net cash for operating activities and spent $325 million as capital expenditure.

Nordstrom recently approved a dividend of 19 cents, payable Dec 14, to its shareholders of record as of Nov 29. In the nine months ending Oct 29, 2022, JWN also bought back 2.3 million shares worth $53 million as part of its $500-million share repurchase program. Following this, JWN has $447 million available under its share repurchase authorization.

Outlook

Management retained the view for fiscal 2022. JWN continues to expect total revenue growth of 5-7% from the last year’s reported figure. Adjusted earnings are envisioned to be $2.30-$2.60. The EBIT margin is likely to be 4.1-4.4%, while adjusted EBIT is expected to be 4.3-4.7%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Nordstrom has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Nordstrom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.