Nordstrom’s net sales and EPS growth
Nordstrom’s (JWN) net sales rose 8% and 3% in 2015 and 2016, respectively. The decline was due to weakness in comparable sales of Nordstrom’s full-line stores in the US offset by Nordstrom.com, Nordstromrack.com/HauteLook, and off-price channels. Comparable sales in the full price channel rose in 2015 before falling in 2016, and Nordstrom Rack’s comparable sales fell in 2015 before rising slightly in 2016. Gross margin expanded 3.3% and 1% in 2015 and 2016, respectively, which was offset by an increase in the cost of sales during the period. Operating income fell 17% and 27%, respectively, in 2015 and 2016. It was affected by higher SG&A and a goodwill impairment in 2016. The company’s EPS fell 15.3% and 36%, respectively, in 2015 and 2016. The EPS numbers were supported by a decline in interest expense during the period and share buybacks.
Net sales rose 3% in 1H17 due to comparable sales growth. Comparable sales of Nordstrom.com, Nordstromrack.com/HauteLook, and off-price channels all saw growth, offset by Nordstrom full-line stores in the US, and Nordstrom Rack. Gross margin expanded 4%, offset by an increase in the cost of sales during the period. Operating income rose 13%, offset by higher SG&A during the period. As a result, the company’s EPS rose 10%, offset by higher interest expense. Share buybacks further enhanced the EPS number.
Nordstrom’s dividend yield
The company’s increasing dividend yield has mainly come from falling prices compared to growth in dividend per share. The dividend remained constant between 2015 and 2017. The stock price has lost 47% compared to the price in 2014. The company generates enough free cash flow to pay off its dividends.
Nordstrom has a dividend yield of 3.5% and a YTD price loss of 12.1%. Let’s compare that with the broad indexes. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.3% and price gains of 18% on a YTD basis. The S&P 500 (SPX-INDEX) (SPY) has a dividend yield of 2.3% and price gains of 15% on a YTD basis. The NASDAQ Composite (COMP-INDEX) (ONEQ) has recorded price gains of 23.2% on a YTD basis.
The WisdomTree US Dividend Growth Fund (DGRW) is a dividend ETF with exposure to Nordstrom. It has a dividend yield of 2.6% and a PE of 20.3x. The Vanguard High Dividend Yield ETF (VYM) is a dividend ETF with exposure to Nordstrom. It has a dividend yield of 3% and a PE of 21.6x.