During a recent presentation to investors, fashion retailer Nordstrom (NYSE:JWN) pointed out that its stock has outperformed the rival retail industry and stock market overall. The level of outperformance has been significant, with $100 invested in early 2002 growing to above $500 by early May of this year. The stock has pulled back rather significantly since, and could present a buying opportunity.

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Recent Developments
The most recent operational update to come from Nordstrom was the sales results from May. Comparable store sales rose a very healthy 5.3% while total retail sales advanced 9.3% to $870 million. Comps, so far, in its fiscal year are up 7.7% while total sales are up 12.6% to a hair over $3 billion. Since last May, a single full-line namesake store has opened while 16 new Nordstrom Rack off-price locations have been opened. The more upscale full-line stores compete with the likes of Saks (NYSE:SKS), privately-held Neiman Marcus and the Bloomingdale's chain of Macy's Corp (NYSE:M). Rack competes with the TJ Maxx and Marshall's chains of TJX Corp. (NYSE:TJX), as well as Stein Mart (Nasdaq:SMRT).

Nordstrom's first quarter sales were $2.5 billion and grew 13.7%. Higher store costs and interest expense resulted in only a modest net income growth of 2.8% as the bottom line reached $149 million, or 70 cents per diluted share. Share buybacks helped boost the per-share earnings figure by 7.7%.

SEE: A Breakdown Of Stock Buybacks

Outlook and Valuation
Analysts currently project full year sales growth of nearly 12% and total sales of almost $12 billion. The company expects to report earnings between $3.31 and $3.56 per diluted share for annual growth in a range of roughly 5 to 10%. This represents a forward earnings multiple between 13.7 and 14.4.

The Bottom Line
Nordstrom's stock hit close to $60 in early May but has fallen some 18% since. Negative stock market sentiment and concerns that the U.S. economy will feel some ill effects from European sovereign debt concerns have played a primary role in sending the share price down.

Overall, the company remains on track to continue to leverage high single digit annual sales growth into double digit annual profit growth, as it has done over the past three years. A reliance on opening Nordstrom Rack stores speaks to the continued cost-conscious environment on the part of consumers. With any sustainable increase in consumer sentiment, it could return to opening a higher number of full-line stores.

SEE: The 4 R's Of Investing In Retail

At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

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