Nordstrom Earnings Preview: Is the High-End Consumer Better Off?

NEW YORK ( TheStreet) -- Retailers that cater to middle and low income consumers, Wal-Mart Stores ( WMT), Kohl's ( KSS) and Macy's ( M), reported disappointed second-quarter earnings suggesting that gas prices and higher payroll taxes have hit consumer spending this year. High-end retailer Nordstrom ( JWN) reports its earnings after the bell on Thursday and may reveal whether upper-income consumers are also feeling the same pressures.

Earnings at both Wal-Mart and Macy's came in below expectations as both retailers blamed softer sales on a consumer still mired in debt and stagnant wages.

"The retail environment remains challenging in the U.S. and our international markets, as customers are cautious in their spending," Wal-Mart's CFO Charles Holley said in the company's earnings release on Thursday.

Might we see the same struggles at Nordstrom?

Nordstrom sits in the luxury retail consumer sector, pitting it against the likes of Saks ( SKS), Neiman Marcus and Bloomingdale's as well as specialty retailers like Michael Kors ( KORS). Chances are the high-end consumer is doing better.

Nordstrom shares were little changed at $59.59 in midday trading.

The consensus among analysts is for Nordstrom to post earnings of 88 cents a share on revenue growth of 9% year over year to $3.29 billion.

On the one hand, Nordstrom's earnings could exceed Wall Street expectations. Sales "rebounded" in the second quarter at Bloomingdales, which is owned by Macy's.

"Bloomingdale's had a very strong second quarter, both in stores and online. This performance was much improved in comparison to the first quarter, which is very encouraging," Macy's CFO Karen Houget said on the call yesterday.

Following Nordstrom's first quarter earnings which fell short of Wall Street expectations, Blake Nordstrom, the company's principal executive officer and president, noted during its earnings call in May that the fiscal second quarter "is a particularly high-volume period for us," given the company's semi-annual sales and its Anniversary Sale in mid-July.

Topeka Capital Markets analyst Dorothy Lakner is expecting Nordstrom to post comparable store sales growth above 6%, "which would be its best comp this year," according to a research note on Tuesday.

"We expect to hear more on the call about the changes made in women's apparel and how they are going (Savvy's repositioning, TopShop expansion this fall) as well as updates on multichannel initiatives and JWN's expansion into Canada next year," Lakner wrote. She rates Nordstrom a "buy."

However Piper Jaffray analyst Neely Tamminga wrote in a note last week that this year's Anniversary event seem "sluggish" when compared to past years and is "cautious" about second-quarter earnings.

Piper Jaffray's analysis of the 638 items featured in the early access catalog found that the percentage of products that were considered "sell throughs" (as measured by those that sold out or had limited quantity) was just 13% vs. 39% at the conclusion of the sale last year, the note said.

"We believe Anniversary Sale trends could be a leading indicator to fall/winter sales," the note said. "While cautious on Nordstrom's near-term trends, we remain constructive on the long-term prospects of the company in the belief that their consumer-centric focus at the store level and online will continue to reap market share gains over time." Tamminga rates Nordstrom "overweight."

Nordstrom reports after the markets close on Thursday.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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