Nordstrom, Inc. JWN has capitalized on momentum-driven factors, including robust growth at its flagship Nordstrom banner, operational efficiencies and a turnaround strategy at Nordstrom Rack. The Rack’s improvement has contributed to Nordstrom's recent gains, as it plays a key role in attracting value-conscious shoppers and diversifying revenue streams.

Closing yesterday’s trading session at $23.22, the shares of Nordstrom are currently trading near the 52-week high of $24.93 attained on Oct. 18, 2024. The current price reflects a slight pullback from the recent high, which may be due to some profit booking. However, if the stock manages to break through its 52-week ceiling, it could reignite buying interest and attract new investors.

This Seattle-based company has experienced a remarkable increase in its stock price in the past six months. The stock has jumped 25.3%, outpacing the Zacks Retail - Apparel and Shoes industry and the broader Retail-Wholesale sector’s rise of 3.7% and 13.8%, respectively. Nordstrom’s large-scale and strong operations have also helped it outperform the S&P 500, which has grown 15.4% in the same period.

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Technical indicators are supportive of Nordstrom's strong performance. The stock is trading above its 50-day and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in Nordstrom's financial health and prospects.

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Factors Driving Nordstrom Momentum

Nordstrom has been focusing on efficiency and better customer experiences by speeding up order fulfillment and improving its product mix. It is also actively managing inventory levels to boost productivity. A key focus has been on Nordstrom Rack, which has shown improvement through better brand options and inventory management.

Nordstrom Rack, the off-price division of Nordstrom, is central to the company’s "Closer to You" strategy, which focuses on creating a smooth, integrated shopping experience across stores and digital platforms. In support of this, Nordstrom has expanded the Rack network significantly, opening five new stores within the last quarter and another five within the past month.

The expansion of these stores aims to improve accessibility for customers, blending in-store convenience with online connectivity for a more unified shopping experience. Customers can also shop online via Nordstrom.com and NordstromRack.com, with the option to pick up their purchases in-store. The stores also offer easy return processes, ensuring hassle-free returns. These services are designed to integrate online and in-store experiences, providing shoppers greater flexibility and convenience.

Nordstrom is making efforts to enhance customer experience through faster delivery. This supply-chain optimization work began in early 2022 and has delivered significant customer benefits and operational efficiencies. Hence, the company remains focused on operational optimization. Going ahead, JWN continues seeking additional efficiencies and improving productivity through inventory management initiatives.

JWN Stock’s Valuation

Nordstrom stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, JWN stock is currently trading at 12.12x on a forward 12-month basis, lower than 16.16x of the industry. A lower P/E ratio often signals that a stock may be priced attractively relative to its earnings potential, which can be appealing to value-focused investors.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

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Investment Guidance on JWN Stock

Nordstrom presents a compelling investment case, driven by a combination of its undervalued position relative to industry peers and strong growth fundamentals. While its forward P/E ratio suggests potential undervaluation, the company's aggressive store expansion and focus on operational efficiencies are key factors poised to drive future profitability. With robust strategies in place to enhance margins and scale revenues, Nordstrom is well-positioned for sustained long-term growth, making it a stock worth considering for investors seeking opportunities in the retail sector. The company currently has a Zacks Rank #2 (Buy).

Other Stocks to Consider

We have highlighted three other top-ranked stocks in the broader sector, namely Abercrombie & Fitch Co. ANF, Shoe Carnival SCVL and Deckers DECK. 

Abercrombie, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for ANF’s current financial-year sales and earnings indicates growth of 13% and 63.4%, respectively, from the year-ago reported figures. Abercrombie has a trailing four-quarter earnings surprise of 27.9%, on average.

Shoe Carnival, one of the nation's largest family footwear retailers, offers a broad assortment of moderately priced dresses and casual and athletic footwear for men, women and children. The stock presently carries a Zacks Rank #2.

The Zacks Consensus Estimate for SCVL's current fiscal sales indicates growth of 5.1% from the year-ago reported figure.

Deckers, a footwear and accessories dealer, currently carries a Zacks Rank of 2. DECK delivered an average earnings surprise of 41.1% in the trailing four quarters.

The Zacks Consensus Estimate for Deckers’ current financial-year sales and earnings indicates growth of 10.3% and 10.7%, respectively, from the year-ago reported figures.

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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

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