On Wednesday, JPMorgan (NYSE:JPM) updated its outlook on Nordstrom Inc (NYSE:JWN), increasing the price target to $20.00 from the previous $19.00. The firm kept its Underweight rating on the retailer's stock. The adjustment followed Nordstrom's second-quarter earnings, which surpassed Wall Street's expectations.
The company reported an adjusted earnings per share (EPS) of $0.96, which was above the anticipated $0.71. This outperformance was largely attributed to a significant gross margin expansion, which saw a year-over-year increase of 155 basis points to 36.6%, exceeding the Street's projection of 35.1%.
In terms of sales, Nordstrom's consolidated same-store sales growth of 1.9% was in line with the Street's forecast of 2.0%. However, the company's administrative, selling, and general expenses saw a slight increase, deleveraging 20 basis points year-over-year to 33.0% of sales, which was still slightly better than the expected 33.1%.
The detailed earnings report showed that the 3.4% net sales growth for the quarter was primarily driven by the Nordstrom Rack brand, which experienced an 8.5% increase, outperforming the Street's prediction of 7.5%.
On the other hand, Nordstrom's Full-Line stores saw a modest 0.9% growth in net sales, which was below the anticipated 1.3%. When adjusted for the beneficial impact of the Anniversary Sale shift, about 200 basis points, Full-Line sales actually saw a decline of 1.1%. This represents a sequential deceleration of approximately 280 basis points compared to the first quarter's underlying full-line growth of 1.7%, after adjusting for the wind-down of operations in Canada.
The second-quarter results have led to a slight increase in the price target by JPMorgan, reflecting Nordstrom's performance in sales and gross margin expansion, with particular strength noted in the Nordstrom Rack brand. Despite the upgrade in the price target, the firm maintains a cautious stance with the Underweight rating on the company's shares.
In other recent news, Nordstrom Inc. (NYSE:JWN) reported positive second-quarter earnings and revenue, exceeding analysts' expectations. The upscale retailer recorded adjusted earnings per share of $0.96, surpassing the anticipated $0.71.
Revenue also increased by 3.4% year-over-year, reaching $3.89 billion, which slightly exceeded projections. Nordstrom's total comparable sales experienced a 1.9% increase compared to the previous year, with Nordstrom's flagship and Nordstrom Rack seeing growth in comparable sales by 0.9% and 4.1% respectively.
Despite these positive results, Nordstrom anticipates a potential slowdown in net sales for the second half of the year, with a forecast range between a 2.5% decline and a 1.3% increase. Evercore ISI maintained its In Line rating and $19.00 price target for Nordstrom, suggesting that the company's stock performance aligns with market expectations.
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