Nordstrom Earnings: Solid Sales Performance but Disappointing Profitability; Shares Very Undervalued

Nordstrom showed progress on its sales initiatives in the first quarter, although some unusual factors negatively affected its gross margin. More importantly, the firm held to its full-year guidance for same-store sales of down 1% to up 2%, an EBIT margin of 3.5%-4%, and $1.65-$2.05 in earnings per share. As our forecast aligns with this outlook, we do not expect to make any material change to our $38.50 fair value estimate, leaving shares very undervalued. Although its results have been rocky since the pandemic, we think Nordstrom can reach its 6% operating margin goal in about two years.