ANF Abercrombie and Fitch Co

Nordstrom Inc. (JWN) posted earnings growth of 32.7% to reach 69 cents a share in the first quarter of fiscal 2011 from 52 cents per share earned in the year-ago period. Earnings per share beat the Zacks Consensus Estimate of 67 cents a share.

Quarterly Details

Nordstrom’s same-store sales and top-line trends were also encouraging. Total revenue grew 12.0% to $2,229 million from $1,990 million in the prior-year period on the heels of a 6.5% growth in same-store sales. Total revenue however fell short of the Zacks Consensus Estimate of $2,240 million.

During the quarter, Nordstrom’s same-store sales (including full-line and Direct businesses) jumped 7.8%, driven by the Designer, Jewelry and Men’s Apparel categories. Full-line same-store sales growth was driven by strong performances in the Midwest and the South. Same-store sales at Nordstrom Rack increased by 1.2%. The company expects same-store sales to grow in the range of 2% to 4% in fiscal 2011.

Lower buying and occupancy costs led to a 30 basis point (bps) year-over-year expansion in gross margin to 40.4% in the quarter. Conversely, retail selling as well as general and administrative expenses increased $78 million to $697 million in the quarter, primarily due to increased operating expenses as well as higher volume of sales and HauteLook operating expenses and purchase accounting charges. However, credit selling, general and administrative expenses shrunk 40.2% year over year to $55 million.  The company expects 2011 gross margin to range from down-to-up 10 basis points.

Consequently, Nordstrom’s operating income posted an increase of $53 million year over year to $272 million, while operating margin expanded 120 bps to 12.2%.

Balance Sheet and Cash Flow

Nordstrom ended the quarter with a cash hoard of $1,433 million, compared with $1,040 million in the year-ago quarter. Long-term debt (including current portion) at the end of the quarter stood at $2,276 million. Nordstrom generated $209 million of cash from operations and utilized $1 million for debt repayment and $116 million for capital expenditure.

Guidance

The company now sees fiscal 2011 earnings per share in the range of $2.80 to $2.95, which represents a decrease of 15 cents from the previous guided range of $2.95 to $3.10.

Nordstrom currently has a short-term Zacks #2 Rank ('Buy') rating. We retain our long-term Neutral recommendation on the company.

Based in Seattle, Washington, Nordstrom Inc. is a leading fashion specialty retailer in the U.S., offering high quality apparel, shoes, cosmetics and accessories for men, women and kids. The company offers both branded and private label merchandise, as well as a private label card, two Nordstrom VISA credit cards and debit cards for Nordstrom purchases.

The company operates in a highly fragmented specialty retail sector and faces intense competition from other well-established players, such as Gap Inc. (GPS) and Abercrombie & Fitch (ANF).

 
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