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Will Soft Demand & Costs Mar Nordstrom's (JWN) Q2 Earnings?
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Nordstrom, Inc. (JWN - Free Report) is scheduled to release second-quarter fiscal 2023 numbers on Aug 24, after the closing bell. This fashion specialty retailer is expected to have witnessed revenue and earnings declines in the to-be-reported quarter.
The Zacks Consensus Estimate for fiscal second-quarter earnings is pegged at 45 cents per share, suggesting a decline of 44.4% from the year-ago quarter’s reported figure. The consensus mark for earnings has moved down by a penny in the past 30 days. The consensus mark for revenues is pegged at $3.65 billion, indicating a decrease of 10.8% from the figure reported in the year-ago quarter.
In the last reported quarter, the company posted an earnings surprise of 158.3%. Also, it delivered an earnings surprise of 54.1%, on average, in the trailing four quarters.
Nordstrom’s second-quarter fiscal 2023 results are expected to reflect the significant impacts of muted customer demand due to the ongoing macroeconomic environment. Reduced consumer spending amid lower income groups, stemming from the tough macroeconomic environment, has been hurting revenues across both banners.
Management expects the impacts of the winding down of Canada operations to hurt revenues throughout fiscal 2023. The impacts of the closure are likely to get reflected in the fiscal second-quarter results. Additionally, the elimination of store fulfillment for Nordstrom Rack digital orders is expected to have weighed on the sales performance of the Rack banner.
Our model estimates a sales decline of 12.5% for the Nordstrom banner and 11.3% for the Nordstrom Rack segment in the fiscal second quarter.
Moreover, the company has been witnessing headwinds related to SG&A expense deleverage due to lower sales. The higher SG&A expense rate is likely to have continued in the to-be-reported quarter, hurting the operating margin.
We expect the gross margin to contract 110 basis points (bps) year over year to 36.7% in the fiscal second quarter, reflecting an increase in the cost of sales. Our model predicts an adjusted operating margin of 3%, suggesting a 230-bps contraction from the year-ago quarter’s actual.
However, the company is committed to enhancing customer experience via its Closer to You strategy, optimized supply chain and better efficiency. These endeavors are expected to have slightly offset demand-related and other headwinds.
On the last reported quarter’s earnings call, management stated that it was focused on enhancing customer experience, improving the Nordstrom Rack performance, increasing inventory productivity and progressing on its supply-chain-optimization initiatives. The company is confident of the strength of its brands, and its ability to drive profitable growth. Gains from the company’s actions are expected to boost its fiscal second-quarter performance.
Nordstrom has been making efforts to drive efficiency and improve customer experience via faster order fulfillment. It is also on track to reduce inventory and optimize product mix. Also, increased focus on Nordstrom Rack bodes well. The company has witnessed an improvement in the Nordstrom Rack banner, driven by strategic brand penetration increases.
The Nordstrom Rack banner has also been on track to increase productivity throughout its network, reduce transportation costs and delivery times, and enhance services via faster delivery. These efforts are expected to have cushioned Rack’s performance in the to-be-reported quarter.
What Does the Zacks Model Say?
Our proven model does not conclusively predict an earnings beat for Nordstrom this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Nordstrom has an Earnings ESP of -8.89% and a Zacks Rank #3.
Stocks With the Favorable Combination
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Five Below (FIVE - Free Report) currently has an Earnings ESP of +1.33% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports second-quarter fiscal 2023 results. The consensus mark for FIVE’s quarterly revenues is pegged at $760.5 million, which suggests growth of 13.7% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for FIVE’s earnings has been unchanged at 83 cents per share in the past 30 days. The consensus estimate indicates 12.2% growth from the year-ago quarter’s reported figure.
American Eagle Outfitters (AEO - Free Report) currently has an Earnings ESP of +11.07% and a Zacks Rank #2. The company is likely to register growth in the bottom line when it reports second-quarter fiscal 2023 numbers. The consensus mark for AEO’s quarterly earnings has moved up 25% to 15 cents per share in the past 30 days. The consensus estimate suggests significant growth of 275% from the year-ago quarter’s reported EPS of 4 cents.
The Zacks Consensus Estimate for American Eagle’s quarterly revenues is pegged at $1.2 billion, which suggests a decline of 1.3% from the figure reported in the prior-year quarter.
Ulta Beauty (ULTA - Free Report) currently has an Earnings ESP of +0.20% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2023 results. The consensus mark for ULTA’s quarterly revenues is pegged at $2.5 billion, which suggests 9% growth from the figure reported in the prior-year quarter.
The consensus mark for ULTA’s quarterly earnings has moved up 0.5% in the past seven days to $5.84 per share. The consensus estimate suggests growth of 2.5% from the year-ago quarter’s actual.
Image: Bigstock
Will Soft Demand & Costs Mar Nordstrom's (JWN) Q2 Earnings?
Nordstrom, Inc. (JWN - Free Report) is scheduled to release second-quarter fiscal 2023 numbers on Aug 24, after the closing bell. This fashion specialty retailer is expected to have witnessed revenue and earnings declines in the to-be-reported quarter.
The Zacks Consensus Estimate for fiscal second-quarter earnings is pegged at 45 cents per share, suggesting a decline of 44.4% from the year-ago quarter’s reported figure. The consensus mark for earnings has moved down by a penny in the past 30 days. The consensus mark for revenues is pegged at $3.65 billion, indicating a decrease of 10.8% from the figure reported in the year-ago quarter.
In the last reported quarter, the company posted an earnings surprise of 158.3%. Also, it delivered an earnings surprise of 54.1%, on average, in the trailing four quarters.
Nordstrom, Inc. Price and EPS Surprise
Nordstrom, Inc. price-eps-surprise | Nordstrom, Inc. Quote
Key Factors to Note
Nordstrom’s second-quarter fiscal 2023 results are expected to reflect the significant impacts of muted customer demand due to the ongoing macroeconomic environment. Reduced consumer spending amid lower income groups, stemming from the tough macroeconomic environment, has been hurting revenues across both banners.
Management expects the impacts of the winding down of Canada operations to hurt revenues throughout fiscal 2023. The impacts of the closure are likely to get reflected in the fiscal second-quarter results. Additionally, the elimination of store fulfillment for Nordstrom Rack digital orders is expected to have weighed on the sales performance of the Rack banner.
Our model estimates a sales decline of 12.5% for the Nordstrom banner and 11.3% for the Nordstrom Rack segment in the fiscal second quarter.
Moreover, the company has been witnessing headwinds related to SG&A expense deleverage due to lower sales. The higher SG&A expense rate is likely to have continued in the to-be-reported quarter, hurting the operating margin.
We expect the gross margin to contract 110 basis points (bps) year over year to 36.7% in the fiscal second quarter, reflecting an increase in the cost of sales. Our model predicts an adjusted operating margin of 3%, suggesting a 230-bps contraction from the year-ago quarter’s actual.
However, the company is committed to enhancing customer experience via its Closer to You strategy, optimized supply chain and better efficiency. These endeavors are expected to have slightly offset demand-related and other headwinds.
On the last reported quarter’s earnings call, management stated that it was focused on enhancing customer experience, improving the Nordstrom Rack performance, increasing inventory productivity and progressing on its supply-chain-optimization initiatives. The company is confident of the strength of its brands, and its ability to drive profitable growth. Gains from the company’s actions are expected to boost its fiscal second-quarter performance.
Nordstrom has been making efforts to drive efficiency and improve customer experience via faster order fulfillment. It is also on track to reduce inventory and optimize product mix. Also, increased focus on Nordstrom Rack bodes well. The company has witnessed an improvement in the Nordstrom Rack banner, driven by strategic brand penetration increases.
The Nordstrom Rack banner has also been on track to increase productivity throughout its network, reduce transportation costs and delivery times, and enhance services via faster delivery. These efforts are expected to have cushioned Rack’s performance in the to-be-reported quarter.
What Does the Zacks Model Say?
Our proven model does not conclusively predict an earnings beat for Nordstrom this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Nordstrom has an Earnings ESP of -8.89% and a Zacks Rank #3.
Stocks With the Favorable Combination
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Five Below (FIVE - Free Report) currently has an Earnings ESP of +1.33% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports second-quarter fiscal 2023 results. The consensus mark for FIVE’s quarterly revenues is pegged at $760.5 million, which suggests growth of 13.7% from the figure reported in the prior-year quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FIVE’s earnings has been unchanged at 83 cents per share in the past 30 days. The consensus estimate indicates 12.2% growth from the year-ago quarter’s reported figure.
American Eagle Outfitters (AEO - Free Report) currently has an Earnings ESP of +11.07% and a Zacks Rank #2. The company is likely to register growth in the bottom line when it reports second-quarter fiscal 2023 numbers. The consensus mark for AEO’s quarterly earnings has moved up 25% to 15 cents per share in the past 30 days. The consensus estimate suggests significant growth of 275% from the year-ago quarter’s reported EPS of 4 cents.
The Zacks Consensus Estimate for American Eagle’s quarterly revenues is pegged at $1.2 billion, which suggests a decline of 1.3% from the figure reported in the prior-year quarter.
Ulta Beauty (ULTA - Free Report) currently has an Earnings ESP of +0.20% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2023 results. The consensus mark for ULTA’s quarterly revenues is pegged at $2.5 billion, which suggests 9% growth from the figure reported in the prior-year quarter.
The consensus mark for ULTA’s quarterly earnings has moved up 0.5% in the past seven days to $5.84 per share. The consensus estimate suggests growth of 2.5% from the year-ago quarter’s actual.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.