No EBIT Margin Expansion at JWN Leaves Little Room for Error
When was the last time you heard a retail management team tell you that there is no EBIT margin upside? We’re guessing never.
But, that’s exactly what Nordstrom (JWN – $52.53) management told investors last week on their quarterly earnings conference call. Of course, this is the same management team that tells investors seemingly every year that the coming year is an “investment year.”
Mike Koppel – Nordstrom, Inc. – EVP and CFO
“We expect no expansion of EBIT margin over the next several years.” “Our merchandise margins right now are at or around all-time highs. We don’t expect any significant expansion there.”
The reality is that there has been very little EBIT margin expansion over the past 3-4 years. Despite impressive top-line growth (an industry leader) over the past 3 years, Retail SG&A Expense has now de-leveraged in each of the last 5 years.
Looking ahead, without the prospect of EBIT margin expansion, the company has no room for error if management expects to deliver earnings at or above today’s consensus sell-side estimates.
