Nordies Reports

Prized by shopaholics and loathed by penny pinching husbands, today after market close, Nordstrom (JWN) reports 4th quarter financial results.

Two days ago, intra-day volume for 10.00 March put options spiked to 1,368 contracts (representing 1.37 million shares, or less than 1% of float); calls of the same strike price only attracted 2 contracts. Betting on short-term momentum has never appealed to my personal investment philosophy. Though JWN’s intrinsic value won’t change much regardless of whether the retailer misses by a penny, traders feel it’s worth betting that the earnings release will disappoint.

Amazingly, during the dotcom bubble, same store sales dropped only 1%. During our current market malaise, however, same store sales have fallen over 12%. There is a price at which I’d love to own such a great brand—the stock is 70% cheaper than the 52-week high. But given the economic headwind, I still wouldn’t now bet on $200.00 jeans.

I’d like to see management cut back on capital expenditures which have eaten into cash flow over the last year. The company should slice its 4.6% dividend yield in half, saving the Seattle-based retailer $70mn per year, which it could use to help trim down the $2.74bn in long-term debt (2x EBITDA).