Nordstrom: Value & Reality Catch the Stock (JWN, KSS)

Nordstrom, Inc. (NYSE: JWN) may serve a different tier of the retail market than Kohl’s Corp. (NYSE: KSS), but it is sharing the same trend: selling off after earnings as valuations caught up to the stocks.  Nordstrom said that net earnings were $116 million, translating to $0.52 EPS.  Same-store sales were up 12% in Q1, but we already mostly knew that sales were way up.  First quarter revenues were up 16.7% at $1.99 billion.  Estimates from Thomson Reuters were $0.55 EPS and $1.97 billion.

A problem in evaluating this earnings report on an apples-to-apples basis versus estimates is that analysts were playing catch-up and they ran too far ahead of the stock.  Estimates were $0.53 a month ago, but were $0.44 90-days ago.  They overshot, and now the valuation is catching up to Nordstrom.

Now Nordstrom is giving higher guidance for 2010 in a range of $2.50 to $2.65 EPS, up from a prior range of $2.35 to $2.55 EPS.  The problem that will be present for forward valuations is that Thomson Reuters already has estimates of $2.61 EPS for 2010 (Jan-2011), giving this one a forward P/E of 15.8 based upon its closing bell price.  For the full year it sees same-store sales up 4% to 6%.

Nordstrom closed down 4% at $41.29 today, and shares are down over 2% at $40.70 in the after-hours reaction.

Kohl’s saw its earnings rise by 45%, but the CEO said that it is seeing consumers spend less than before the recession started.  Kohl’s closed down 5.8% at $53.81 versus $57.15 yesterday, and the 52-week trading range is $40.64 to $60.89.

Had it not been for Kohl’s taking Nordstrom shares lower today, the after-hours reaction in Nordstrom might have been worse.

JON C. OGG