Nordstrom had a decent 2018 with +1.7% comps growth.
It expects +1% to +2% net sales growth in 2019, with comps growth similar to that.
Various initiatives may allow it to incrementally improve EBIT margin despite sales growth primarily coming from lower margin channels.
Share repurchases are expected to continue, but may be lower in 2019 due to the investments in opening its Manhattan flagship store.
A 6.0x EV/EBITDA puts Nordstrom’s target price at a bit over $51.
Nordstrom (JWN) continues to be a fairly well-run department store, occupying a position in the higher end of the market that has proven to be more resilient than mid-priced department stores. It saw solid +1.7% comps in 2017, although that was driven by strong Off-Price performance that resulted in a bit of margin pressure.
Nordstrom will likely fall a bit short of its longer-term goals (including $18 billion in sales for 2022), but nonetheless looks to be a reasonably good value at $43. It appears capable of modest comparable store sales growth, while various initiatives may allow it to improve its EBIT margin incrementally over the next few years.
Nordstrom’s 2019 outlook appears to be decent, with expectations for 1% to 2% net sales growth (and comps close to that of net sales). It also mentions that it expects its EBIT margin to be around 5.9% to 6.1%.
Margins are expected to improve a bit with Nordstrom’s inventory in fairly good shape to start the year, as well as an expectation for improved inventory turnover. Nordstrom’s EBIT margins have a ways to go to reach its 2020 goal of 6.3% to 6.5% EBIT though, and I think it is likely to end up at the lower end of that range or below for 2020.
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