Nordstrom tank shares after reporting sales below 2019 levels

Shares of Nordstrom fell nearly 17% on Wednesday, while analysts plunged into the outlook for the department store chain.

Late Tuesday, Nordstrom posted second-quarter tax gains that exceeded expectations and boosted its outlook. However, revenue remained below 2019 levels, even in an attempt to convince shoppers to return to the store with their big annual birthday sale.

Wednesday’s sale hits a four-day profit streak.

In a research note, JPMorgan analyst Matthew Boss said Nordstrom’s performance remains disappointing. He said the current economy should be “as good as it gets” for Nordstrom’s customer base as it tends to attract a high-income buyer. These consumers have had more money to spend on coming out of the pandemic.

While other retailers have managed to raise their average selling prices, Nordstrom lags behind, by comparison, according to Boss. It downgraded its rating of shares to underweight from neutral and lowered its price target from $ 34 to $ 39. This price is 7% higher than the stock market on Wednesday.

Daniela Nedialkova, an analyst at Atlantic Equities, said Nordstrom is well positioned as demand for clothing to go out to social events increases, but its weaker relative performance may cause other problems for the retailer with clothing manufacturers.

“We appreciate Nordstrom executing its plan and being highly focused on its margin recovery path, but given the number of current quarters, the pace of recovery has lagged behind, we hope more structural issues may arise around relationships. with the vendors, ”Nedialkova said. dit.

Last week, Macy’s reported second-quarter results that crushed estimates and raised its focus for the rest of the year. Kohl’s also raised its outlook for the second time this year as it anticipates a strong back-to-school season.

“Despite an impressive rebound and rise, the results are below the high bar set in department stores by Dillard and Macy’s, with Nordstrom apparently benefiting less from Covid’s tailwinds in relation to the sector, probably disappointing investors looking for signs of momentum due to industry winds, as well as signs of fundamental improvement enough to trigger a return, ”said Jen Redding, an analyst at Wedbush.

UBS has a stock rating and a target price of $ 12, a drop of more than 60% from its current share price.

“We expect continued downward revisions to the consensus EPS estimates for sale in the coming quarters to boost stocks toward our $ 12 [price target], ”UBS analyst Jay Sole said in a research note.