Nordstrom (JWN -0.15%) is slowly bouncing back from the devasting effects that the coronavirus pandemic had on its business. Recall that nearly all its stores had to shut down to in-person shopping at the onset of the pandemic. As a result, it's coming off a fiscal year that ended on Jan. 30, 2021, that saw overall revenue decline by 30.9%.

Now, as more people are getting vaccinated and feeling better about leaving their homes, sales are starting to recover at Nordstrom. And stimulus checks that hit bank accounts in March and April are likely having a positive effect. Rival Macy's (M -1.87%) already reported excellent quarterly results and raised expectations for the rest of 2021.

So the pressure is on Nordstrom now to produce good results. That's why when Nordstrom reports fiscal 2021 first-quarter earnings Tuesday, May 25, overall revenue will be what investors and those interested in the stock will need to pay close attention to.

A woman buying a skirt at a clothing store.

Nordstrom sees the potential to reach $17 billion in annual revenue. Image source: Getty Images.

The pressure is on Nordstrom

In the fourth quarter, revenue declined by 19.6% year over year. And net sales were down 20% from the same quarter in 2019. The drop-off highlights the negative effects the pandemic is having on its business. However, in a good sign for the apparel industry, Macy's reported excellent comparable results on May 18 that saw net sales growing by 56% year over year. Nordstrom shareholders will welcome a similar result.    

Nordstrom did not provide an outlook for the first quarter, but it did provide one for the full year 2021. The company informed investors to look for it to report revenue growth of more than 25% in the year.

Additionally, Nordstrom sees the potential it can reach overall annual revenue of $17 billion in the next three to five years. That would be quite an accomplishment, considering its fiscal 2020 revenue was $10.35 billion and even in the pre-pandemic fiscal year of 2019, it was $15.1 billion.

In a business like Nordstrom, with a high portion of fixed costs, revenue becomes crucially important. Recall that fixed costs like rent will be incurred regardless of whether the company makes sales or not. Also, fixed costs stay relatively flat, so as you increase sales, costs stay close to the baseline and profits start to expand. 

What this could mean for investors 

Analysts on Wall Street expect Nordstrom to report revenue of $2.87 billion and earnings per share of $0.61. If the quarter plays out as analysts estimate, it would mean revenue growth of 18.9% year over year. 

Folks in the U.S. received stimulus checks in March and April, and from the reports of other retailers, it's clear they are out spending that money. Expectations are high for Nordstrom to report similarly strong revenue growth. That's raising the risk for the stock. Shares of the retailer are already up 22% as investors anticipate a recovery from pandemic-induced lows. If the company misses revenue expectations, it could send shares lower following the report.

Investors should tread carefully around this stock. It is better to wait for clear signs that it has turned things around before considering starting a position in Nordstrom.