Nordstrom: 2015 outlook reflects higher spending

Nordstrom: Strong 2014 earnings keep expansion plans on track (Part 8 of 9)

(Continued from Part 7)

Nordstrom gets stronger

Nordstrom (JWN) has strengthened its business over recent times with its accelerated expansion into online and off-price spaces. The company generated sales of $13.5 billion in 2014 and has a long-term goal of delivering over $20 billion in sales by 2020. The company ranks 14th in Fortune magazine’s list of most admired companies.

Nordstrom and its department store peers including Macy’s (M), Dillard’s (DDS), Kohl’s (KSS), and Sears (SHLD) sell consumer discretionary products like apparel and accessories. The SPDR S&P 500 ETF Trust (SPY) has 0.26% of its holdings invested in Nordstrom, Macy’s, and Kohl’s, combined.

Sales outlook

Nordstrom expects its fiscal 2015 sales to grow by 7% to 9%, up from $16.5 billion in fiscal 2014. New Rack and full-line stores as well as the fast growing online channel will facilitate further growth. Also, credit card revenue is expected to increase ~5% due to volume growth. Comparable or same-store sales are expected to be up in the range of 2% to 4% compared to the previous year. In fiscal 2014, Nordstrom’s same-store sales grew by 4%.

Impact of expansion into Canada

Nordstrom expects its ongoing expansion plans into Canada to impact earnings as a result of infrastructure and pre-opening costs. The estimated loss before interest and taxes on Canadian stores is expected to be ~$60 million in fiscal 2015, compared to a loss of $32 million in fiscal 2014.

Impact of Trunk Club acquisition

The company expects an estimated loss before interest and taxes of ~$30 million related to Trunk Club, compared with a loss before interest and taxes of ~$25 million in fiscal 2014.

Earnings outlook

Nordstrom expects its growth plans and higher expenses to impact its bottom line. It’s likely to record $30 million in expenses related to growth initiatives, which include an additional fulfillment center and an expansion of the Nordstrom Rewards loyalty program, both slated for the second half of fiscal 2015.

Excluding the impact of any future repurchases, Nordstrom’s 2015 outlook for diluted earnings per share, or EPS, is in the $3.65 to $3.80 range. In the first half of fiscal 2015, diluted EPS is expected to be below the full-year outlook range of a 2% decrease and 2% increase, owing to the impact of store pre-opening expenses and the Trunk Club acquisition.

Continue to Part 9

Browse this series on Market Realist:

• Part 1 - Nordstrom’s fiscal 2014: Multichannel strategy fuels growth

• Part 2 - Nordstrom’s 4Q14 sales beats estimates, stock surges

• Part 3 - Nordstrom’s 4Q14 earnings miss expectations