Financial Research Report

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Nordstrom, Inc.

YL eServices Pvt. Ltd.
Bangalore, India
Price: $ 33.64
Price Target $ 28.93

Company description
Nordstrom, Inc. is a fashion specialty retailer that offers a selection of apparel, shoes, cosmetics and accessories for women, men and children

Business Details

As of March 20, 2009, the Company operated 171 stores located in 28 states in the United States. It includes 109 Nordstrom full line stores, 58 Nordstrom Rack stores, two clearance stores, and two Jeffrey boutiques. Nordstrom, Inc. offers a selection of brand name and private-label merchandise. The Company offers its products through multiple retail channels, its Faconnable boutiques, its catalogs and on the Internet at http://www.nordstrom.com/. Company offers its customers a variety of payment products and services, including its loyalty program. Nordstrom, Inc. operates in four business segments: Retail Stores, Direct, Credit, and Other.

The projected revenue & net profit of the company are $9.277 & $0.446 billion in FY 2009 respectively. Revenue breaks up by segment & products are presented below.

The business environment during 2008 was both challenging and volatile. The first half of the year was relatively stable with quarterly same-store sales decreasing between 6.0% and 6.5%. The second half of 2008 was more volatile as consumers reduced their discretionary spending due to economic concerns and uncertainty, and retailers struggled to align their businesses with significantly lower levels of demand. Consequently company has experience negative growth rate in revenue, gross profit, operating and net profit margin.

Reason of negative growth is systematic risk due to global economic slowdown & US job cut, which have direct impact on retail demand. Hence we will see positive growth rate as and when Global financial market start improving. Good part is US government and Federal Reserve has taken serious step; we can now experience positive movement in market.

We can read in below price movement chart, stock has started decline from $ 34 on 1st April 2008 in similar line with economic slowdown. Price has gone down to $8 per share compared to $34 only because of economic slowdown. Hence we are hoping, as we can see in recent month, price will be stable one global market stabilized.

Competition
Nordstrom faces competition from privately held company, normally Bloomingdale’s Inc, The Neiman Marcus Group Inc, and Saks Fifth Avenue Enterprises. Bloomingdale’s is engaged in sale of apparels, cosmetics and other accessories through 40 stores in 12 states primarily in California, Florida and New York. The Neiman Marcus department store offer high fashion, high quality women and men apparels through 40 stores in 20 states and the District of Columbia. Saks Fifth Avenue stores and some 50 off 5th "luxury off-price" stores in 25 states and abroad, their product line includes apparels cosmetics jewellery and shoes.

Prospects:
Nordstrom is implementing the “Robust” Project which is expected to complete by 2013. This project involves 28 new stores in US. New store openings also involve certain risks, including constructing, furnishing and supplying a store in a timely and cost effective manner and accurately assessing the demographic or retail environment for a particular location. However, after the completion of the project company will have strong market poison in the US.

With the help of key financial ratio and last one year price movement, Investor can see this as a good script since its PE Ratio, EBITDA, and profitability ratio are above industry average.

However Nordstrom Bita is high “1.86” (Source Google finance) due to which price calculated with the help of discounted cash flow method is 29.99, which is less than current market price of 33.64.

Sensitivity:
The company is operating in highly dynamic fashion industries. Any failure in company’s part to recognize any fashion changed may impact its operation.

Future sales at new, relocated or remodeled stores may not meet projections, which could affect return on investment. Performance of new stores could also be negatively impacted if company is unable to hire employees who are able to deliver the level of service for which customers have come to expect when shopping in stores.

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