Nordstrom Sees Weaker-Than-Expected Sales in Fiscal 2021

Nordstrom forecast a revenue gain of 25% for the fiscal year, lower than forecasts.
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Nordstrom  (JWN) - Get Report shares declined Thursday after the upscale department store chain forecast weaker-than-expected sales growth for fiscal 2021, which began Feb. 2.

The company forecast a revenue gain of 25%, compared to the Refinitiv analyst consensus of 26.6%. Nordstrom expects digital sales to total 50% of revenue. It predicts EBIT will be positive and the leverage ratio will be about 3 times by year-end.

For the long term, Nordstrom said it expects revenue to grow low single-digits annually from 2019 levels; operating income is expected to grow faster than revenue; and EBIT margin, as a percentage of sales, is expected to exceed 6%.

In addition, return on invested capital is expected to be in the low teens; annual operating cash flow is expected to exceed $1 billion; annual capex is expected to be 3% to 4% of sales; and the leverage ratio is expected to return to about 2.5 times or below by the end of 2022.

Shares of Nordstrom traded Thursday at $35.15, down 3.7%. 

Morningstar analyst David Swartz put fair value at $33.50. 

“We believe narrow-moat Nordstrom continues to be a top operator in the competitive U.S. apparel market,” the analyst wrote in December.

“Nordstrom has, in our view, cultivated a loyal customer base on its reputation for differentiated product and service and has built a narrow moat based on an intangible brand asset,” he said.

Swartz said he expects Nordstrom to post a loss for 2020 because of Covid; he thinks it will return to profitability in 2021.