Retail stock under pressure: Nordstrom, Inc. (NYSE: JWN)

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Nordstrom, Inc. (NYSE: JWN) stock fell over 10% on 29th May, 2020 (as of 10:12 am GMT-4 ; Source: Google finance) after the company posted lower than expected results for the first quarter of FY 20. The Company temporarily closed stores on March 17 on the back of COVID-19, which had a significant effect on financial results as stores made up two-thirds of its business in 2019. Prior to the closures, the company had strong momentum from the second half of 2019 and it had continued into February with positive sales growth. In the e-commerce business, sales rose 5% and reached more than $1 billion for the first quarter. Online demand trends were consistent with the second half of 2019. While the stores were temporarily closed, the e-commerce business had more than 50% growth in customers who are new to Nordstrom.

Further, the company had started the year with $850 million in cash and increased their position to $1.4 billion by the end of Q1. The company took early measures to enhance the liquidity and reduce the cash burn by more than 40% from March into April. The company has suspended dividends and share repurchases, amended and drew down $800 million on the revolver, and issued $600 million in secured debt.

Moreover, the company continues to make reductions to the base cost structure. Initially the company had planned for expense savings to be in the range of $200 million to $250 million included end-to-end productivity improvements in overhead, procurement, and generational investments, in addition to greater fulfillment and marketing efficiencies. Due to COVID-19, the company is also executing further cash savings of more than $500 million for the year. As a result, the company is on track to deliver on the initiatives and realized approximately $100 million in gross savings in Q1. The company has ended the first quarter with inventory down more than 25% from last year, which reflected a decline of 15% in units. The company is planning to realign inventory by Q2, excluding the Anniversary shift.

JWN in the first quarter of FY 20 has reported the adjusted loss per share of $2.23, missing the analysts’ estimates for the adjusted loss per share of $1.21, according to Zacks Investment Research. The company had reported 40 percent fall in the adjusted revenue to $2.03 billion in the first quarter of FY 20, missing the analysts’ estimates for revenue of $2.25 billion. The company posted the gross profit margin of 11%, down from 34% last year, and reflected merchandise margins in the high-twenties range.

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