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Things You Need to Know Before Nordstrom's (JWN) Q2 Earnings

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Nordstrom, Inc. (JWN - Free Report) is scheduled to release second-quarter fiscal 2019 numbers on Aug 21, after the closing bell.

Notably, the company has a robust earnings surprise history, having surpassed estimates in 10 of the trailing 12 quarters. However, it has witnessed an average earnings miss of 5.78% in the last four quarters.

Let’s see how things are shaping up prior to the company’s upcoming earnings release.

Which Way Are Q2 Estimates Headed?

The Zacks Consensus Estimate for second-quarter earnings is pegged at 80 cents, indicating a decline of more than 15% from the year-earlier reported figure. Estimates remained stable over the past 30 days.

Nordstrom, Inc. Price and EPS Surprise

Nordstrom, Inc. Price and EPS Surprise

Nordstrom, Inc. price-eps-surprise | Nordstrom, Inc. Quote

For quarterly revenues, the consensus mark is pinned at $3.96 billion, implying a 2.7% decrease from the figure reported a year ago.

Factors Likely to Influence 2Q19

Nordstrom has been witnessing strained gross margin for a while now due to higher expenses and lower sales. Increased markdowns to realign inventory to sales trends and higher occupancy expenses have hurt gross margin in the last reported quarter.

Further, higher cost of investments toward occupancy, technology and marketing expenses have resulted in increased near-term costs. Increase in supply chain costs, reflecting higher fulfillment and delivery expenses in relation to digital growth, are leading to higher expenses and weighing on margins. These expenses might negatively impact the company’s operating performance and profitability in the fiscal second quarter.

Nevertheless, Nordstrom’s robust omni-channel initiatives including store-expansion strategy and advancement in the technology space are likely to aid its top line in the quarter to be reported. The company has also been progressing well with its expansion in Canada. Further, management remains keen on domestic store expansion. Apparently, the company introduced a men’s store in New York City and remains on track to open a women’s store in October 2019.

Nordstrom’s significant progress on its customer-based strategy is an added positive. This strategy focuses on three strategic factors — leveraging the company’s brand strength, providing excellent services and offering compelling products to its customers. We expect these strategic efforts to aid the company’s performance in the to-be-reported quarter.

What Does the Zacks Model Say?

Our proven model does not show that Nordstrom is likely to beat estimates in second-quarter fiscal 2019. A stock needs to have — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) as well as a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Nordstrom’s Zacks Rank #3 increases the predictive power of earnings beat, its Earnings ESP of -3.93% makes surprise prediction difficult.

Stocks With 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.

Target Corporation (TGT - Free Report) has an Earnings ESP of +1.04% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. (BURL - Free Report) has an Earnings ESP of +0.35% and a Zacks Rank of 2.

Ross Stores, Inc. (ROST - Free Report) has an Earnings ESP of +1.79% and a Zacks Rank #3.

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