The Long Case for Nordstrom (JWN)

JWN ($38.85) is a classic example of a great business at a fair price for the investor with a medium to long-term horizon and an appetite for a "heads, I win; tales, I don't lose too much" type scenario. Plagued by concerns of the credit crunch and housing downturn, JWN has fallen 35% since its 52-week high in February. Critical to most investors' minds is the uncertainty of this year's holiday season. Something worth noting: during '01-'02 downturn, Nordy's saw same-store-sales drop -2.9% in '01 and recover to +1.4% in '02. Nordstrom should weather the short-term market difficulties as it grows sales and easily sells off its holiday levels of inventory.

Thesis: better than expected holiday sales from higher-income shoppers less exposed to economic downturn; margin expansion; shareholder-aligned management; $1.5B share repurchase authorization (15% of company); profitable square footage growth of 4-5% through 2011, coupled with strong ROIC (21%); attractive valuation: EV/S: 1.22, EV/EBITDA: 7.4.


Disclosure: the author recently purchased shares of JWN

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