22 November 2019 by jbchevrel
Nordstrom Inc. (JWN) is an US fashion retailer of apparel, shoes, and accessories. JWN operates through multiple channels (discount stores, boutiques, catalogs, and online). Today JWN was the best performer in CDX IG, the 5y CDS going tighter by -25bp to 146bp. It went from #5 widest name to #6, as it is now tighter than KSS (152bp -8) and it was already clearly tighter than FD (196bp -16). JWN results came as a bright spot in the department-store sector, after KSS and FD both cut their outlooks this week. The outlook for JWN was slightly better, they now project EBIT in $815-855m and flat sales (from -2% lower). Revenue has beat slightly at $3.67b (exp $3.58b) although the figure was 2% lower in Q3-19 than in Q3-18. JWN realized $170m expense savings year-to-date and expects to well-exceed its plan of $150-200m for the year. More broadly, SGA expenses decreased relative to sales, down -1.32% (absolute, oya) to 31.8%. Excluding the credit-related charge of $72 million in 2018, expenses deleveraged by approximately 60 basis points due to New York City flagship pre-opening costs. Q3-19 EBIT were $193m (5.4% sales) compared with $105m (2.9% sales) in Q3-18. Excluding a $72m estimated non-recurring credit-related charge in 2018, EBIT margin expanded by approximately 0.5%. Q3-19 net earnings were $126m compared with $67m in Q3-18. Q3-18 results included an after-tax estimated non-recurring credit-related charge of $49m. Excluding this charge, earnings grew +9% oya. JWN highlighted in their presentation that they plan to cut capex next year, from $900m this year to less than $600m, i.e. less than any of the five past years. Of their recent investments, their new Manhattan flagship has been seemingly a success so far, with 85k visits during the first weekend. It is notable that the online vector of sales keeps growing fast, with digital sales up +7%. This trend is likely to continue, although JWN tries to keep attracting customers in their physical shops with loyalty program and by improving their ‘shopping experience’. As far as the former, the Nordy Club now has 12m+ active customers, this is +13% higher oya, and those accounted for 65% of sales in Q3-19. At this point, digital sales represent 34% of the total sales of the group. Supply-wise, last November 6, JWN issued $500m senior unsecured 10-year notes. This is expected to be a leverage neutral transaction as JWN expects to use these proceeds in early December to fully retire its May 2020 notes.