Nordstrom Rings the Register: Is Now the Time to Buy?

The resiliency of the affluent consumer is unparalleled as of late. Shoppers were once again out in force during the holiday season for upscale department store Nordstrom (NYSE: JWN  ) , which last night reported very solid fourth-quarter results and issued guidance for fiscal 2012.

For the quarter, same-store sales rose an impressive 7.1% while overall earnings jumped a more modest 1.7% to $1.11. One of the reasons Nordstrom is able to continuously surpass analysts' estimates is its ability to sell merchandise at full price. According to statements released from the company last night, the amount of merchandise being sold at full price is back to pre-recession levels.

The same can't be said for some of Nordstrom's mall-based rivals. J.C. Penney (NYSE: JCP  ) only recently revised the way it approached consumers regarding discounts, abandoning its "discount first, ask questions later" policy. In fact, last year 72% of total sales for J.C. Penney came from merchandise marked down by at least 50%.

Higher-end teen retailer Abercrombie & Fitch (NYSE: ANF  ) has also had problems with discounting. In its recently reported fourth-quarter results, profits tumbled 79% over the year-ago period.

The thing to keep in mind is that Nordstrom's success isn't hinged only on its ability to sell at full price. The company is innovating as well and making it easier for its customers to stay on top of the latest fashion trends. Nordstrom is in the process of increasing the selection of its online inventory. More importantly, the company has linked its in-store inventory for its online customers so they can see where particular merchandise is located.

This hits a very key point of today's consumers: It's not just the right price, but the right time that can sometimes be the most important factor to creating a sale. Consumer Reports recently surveyed 55,000 customers' shopping experiences both in store and online, and Wal-Mart (NYSE: WMT  ) and Sears Holdings (Nasdaq: SHLD  ) were given the lowest scores of the retailing group for overall online satisfaction. Wal-Mart may be the king of retail, but it has a lot to learn about guiding its customers through their online shopping experience.

Although Nordstrom wasn't included in this Consumer Reports survey, it's clear it's doing something right. Online sales for the quarter jumped 35% and the company expanded its free shipping to all price-points (the previous threshold was spending $200 or more).

For fiscal 2012 Nordstrom forecast same-store sales growth of 4% to 6% with EPS in the range of $3.30 to $3.45. Wall Street didn't take kindly to the EPS guidance, which is slightly below the consensus estimate for $3.59.

Despite this "miss," I feel Nordstrom has taken the necessary steps to keep both its in-store and online customers shopping, and its guidance is nothing short of solid in my book. Even though I am currently down by 4% on my CAPScall of outperform on Nordstrom, I see no reason not to continue being optimistic on its long-term outlook.

Disagree with me? Tell me in the comments section below and consider adding Nordstrom to your free and personalized watchlist.

Also, don't let your search for great companies end here. I invite you to get your very own copy of our latest special report, "The Motley Fool's Top Stock for 2012," in which our chief investment officer reveals a name he dubbed the "Costco of Latin America." Find out the name of this company free for a limited time!

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that's just the right price: free!


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