Earnings Preview: Nordstrom

Nordstrom (JWN) is expected to report Q3 earnings after market close Thursday, November 13, with a conference call scheduled for 4:30 pm ET.

Guidance

Analysts are looking for a profit of 31c on revenue of $1.82B. The consensus range is 27c to 35c for EPS, and revenue of $1.79B to $1.95B, according to First Call. On November 6, Nordstrom reported October same-store sales declined 15.7% vs. the Retail Metrics estimate of a 13.1% decline. The company reported preliminary sales of $529M for the month, a decrease of 15.5% from October 2007 and forecast Q3 EPS slightly below the projected 32c to 37c range. Between the faltering economy, soaring food and gas prices, limited credit, slumping home prices and worries about jobs, shoppers remain unnerved and have cut back spending on discretionary items. Instead of spending at department stores, consumers are flocking to wholesale clubs and discount apparel chains.

Analyst Views

Credit Suisse analyst Michael Exstein sees mall-anchor retailers like Nordstrom emerging from this crisis, but it is not clear in what manner the other players come out of this period. In terms of consolidation, Credit Suisse's Gary Balter believes there will not be many acquisitions in the near-term and that SSS will be near historical lows, only beginning to improve after excess square footage is gone. The analysts say retailers are in for an absolutely horrible holiday season and there will not be a recovery until 2010.

To combat the dismal environment, Nordstrom is using its price-matching strategy to compete for shoppers. Daniel Butler, head of retail operations at the National Retail Federation, believes that retailers will likely look beyond discounting toward cutting costs, including cutting back on seasonal hiring.