Nordstrom Post Deeper Loss in Q1, Shares Fall

Seattle-based luxury department store chain Nordstrom reported a deeper-than-expected loss in the first quarter and said its net sales fell 13% over the first quarter of 2019, sending its shares down over 5% on Wednesday.

The company said net sales increased 44% from the same period in fiscal 2020 and decreased 13% from the same period in fiscal 2019, representing a sequential improvement of 720 basis points relative to the fourth quarter of fiscal 2020.

Nordstrom reported a loss of $166 million, or $1.05 per share, worse than the Wall Street consensus estimates for a loss of $0.57 per share, compared to a loss of $521 million, or $3.33 a share, a year ago. But the company said its total revenue rose to $3.01 billion, beating the market expectations of $2.90 billion.

Nordstrom shares slumped over 5% to $34.63 on Wednesday. The stock rose over 10% so far this year.

Analyst Comments

“1Q EPS miss and management’s conservative outlook drove the stock -7% AMC. This suggests investors expected stronger results on the back of significant retailer beat & raise quarters. We flag conservative guidance appears beat-able, but the good news seems largely priced in. Staying EW on $36 price target,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“Despite the weaker 1Q results relative to peers, we would expect JWN sales & earnings recovery to accelerate through the year. Overall, JWN’s 2021 guidance appears conservative and beatable, which will be necessary to support the shares at this price. All in, we are constructive Nordstrom revenue and margin growth potential for 2021 and into 2022, as it benefits from lagged re-opening tailwinds. But the good news appears priced in.”

Nordstrom Stock Price Forecast

Seven analysts who offered stock ratings for Nordstrom in the last three months forecast the average price in 12 months of $38.57 with a high forecast of $48.00 and a low forecast of $20.00.

The average price target represents an 11.28% increase from the last price of $34.66. Of those seven analysts, two rated “Buy”, four rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast of $36 from $34 with a high of $53 under a bull scenario and $21 under the worst-case scenario. The firm gave an “Equal-weight” rating on the specialty retailer’s stock.

Several other analysts have also updated their stock outlook. Telsey Advisory Group lowered the target price to $36 from $44. Deutsche Bank cut the target price to $40 from $42. JPMorgan slashed the price target to $39 from $42. Barclays raised the target price to $20 from $19.

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Nordstrom Shares Slump About 3% on Disappointing Holiday Season Sales

Seattle-based luxury department store chain Nordstrom said net sales declined nearly 22% in the nine-week holiday season as shoppers avoided department stores due a fresh spike in COVID-19 cases, sending its shares down about 3% in extended trading on Wednesday.

However, digital sales surge 23% over last year and represented 54% of total sales compared with 34% from the same period in fiscal 2019. The specialty retailer forecasts to deliver positive earnings before interest and taxes (EBIT) and operating cash flow for the fourth quarter.

“We expect the consensus 2020 EPS estimate to fall about 9% on today’s release (about -32c lost on the full year as the 46c Street 4Q estimate likely falls to about 14c as implied by y/y EBIT margin contraction). On the positive side, holiday-related headwinds that impacted the quarter likely abate going forward,” wrote Kimberly Greenberger, equity analyst at Morgan Stanley.

“We slightly lower our 4Qe EBIT margin estimate to be in-line with management’s -500 bps y/y forecast. More specifically, we marginally lower both 4Q gross margin and SG&A rate by 15 bps each due to the aforementioned headwinds, yielding -500 bps y/y EBIT margin (2.3% vs. 2.6% prior).”

Following this announcement, Nordstrom shares fell about 3% to $36.5 in extended trading on Wednesday; the stock plunged over 20% in 2020.

Nordstrom will hold an analyst event on Feb. 4 and report its full earnings on March 2. We expect to update our model and analysis after these events, although we do not anticipate any significant changes to our long-term view or valuation. The firm is likely to report an EPS loss of more than $4.00 for 2020, but we forecast positive EPS in 2021 (our current expectation is $1.57),” said David Swartz, equity analyst at Morningstar.

“In the long term, we forecast revenue growth and operating margins of about 2% and 5%, respectively. We view Nordstrom as fully valued as its shares trade at a slight premium to our per share fair value estimate of $33.50.”

Nordstrom Stock Price Forecast

Eleven analysts who offered stock ratings for Nordstrom (JWN) in the last three months forecast the average price in 12 months at $24.00 with a high forecast of $35.00 and a low forecast of $11.00. The average price target represents a -36.14% decrease from the last price of $37.58. From those 11 analysts, two rated “Buy”, seven rated “Hold” and two rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $19 with a high of $35 under a bull scenario and $10 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the specialty retailer’s stock.

Several other analysts have also recently commented on the stock. Credit Suisse raised the target price to $39 from $26. Keybanc upped the price objective to $42 from $35. Wedbush increased the stock price forecast to $35 from $17. In November, Nordstrom had its target price lifted by Telsey Advisory Group to $28 from $24. Zacks Investment Research upgraded Nordstrom from a sell rating to a hold rating and set a $17 price target.

Analyst Comments

“Secular Challenges Eclipse Nordstrom’s (JWN) Strengths: JWN’s standout service, competitive pricing, coveted product, and seamless multichannel shopping experience differentiate JWN from department store peers and should stay relevant L-T, especially as high-end consumers kick start spending again,” Morgan Stanley’s Greenberger added.

“However, department store margins appear in secular decline, largely driven by channel shift to lower margin eCommerce sales, and JWN is not immune. Although we think JWN can remain highly relevant, its future earnings growth rate appears limited.”

Upside and Downside Risks

Risks to Upside: 1) Strength at the high end causes a meaningful rebound in-store comps and eComm. 2) EBIT margins stabilize after multi-year declines. 3) Capital spending on IT/Tech decelerates, potentially allowing JWN to drive expense leverage on a 1-2% comp. 4) Rack.com proves resilient– highlighted by Morgan Stanley.

Risks to Downside: 1) 2020 COVID-19/recession impact more severe than anticipated. 2) CECL has a greater impact than forecasted to credit revenue.

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