Nordstrom Brands Don't Subscribe To 'Department Stores Are Dead' Mantra: Analyst Explains Why

Author: Nabaparna Bhattacharya | May 31, 2024 02:23pm

Nordstrom, Inc. (NYSE:JWN) is a compelling partner for brands that do not subscribe to the “department stores are dead” mantra.

That’s according to BMO Capital Markets analyst Simeon Siegel, one of four experts weighing in on the retailer’s first-quarter earnings.

Adjusted losses were 24 cents per share (analysts expected losses of 7 cents per share).

Here’s a glimpse into Siegel’s and other experts’ reactions to the company’s quarterly performance:

Siegel reiterated the Market Perform rating on Nordstrom, with a price forecast of $20.
Telsey Advisory Group analyst Dana Telsey reiterated the Market Perform rating on Nordstrom, with a price forecast of $19.
JPMorgan analyst Matthew R. Boss reiterated the Underweight rating on the stock, with a price forecast of $17.
BofA Securities analyst Lorraine Hutchinson reiterated the Underweight rating on Nordstrom, raising the price target to $18 from $15.

BMO: Siegel views the company’s revenue guidance as conservative, with potential questions surrounding margin improvement.

Nordstrom is clearly challenged, and with historically choppy gross margins, coupled with Rack’s relative underperformance among the off-prices and an aggressive fiscal year guidance.

The analyst cautioned that although shares appear inexpensive, numbers appear high.

Telsey: Nordstrom’s topline growth in the first quarter is encouraging, with the full-line segment growth slightly positive for the first time since the third quarter of 2022 and continued double-digit growth at Rack.

That said, margin challenges pressured the better topline results, resulting in a significant operating loss and negative earnings in the quarter.

Nordstrom is focused on increasing its digital growth, Rack’s store openings, and better customer experience.

Given the continued merchandising issues in both banners, the lack of earnings growth this year, and limited visibility to significant upside from a potential take-private transaction, the analyst reiterated the Market Perform rating.

JPMorgan: Nordstrom quarterly sales were driven by active (led by recognizable brands including Vuori, Hoka, and Adidas), kids’ apparel, and women’s apparel segments.

According to the analyst, with the current backdrop potentially “as good as it gets” for the company, absolute and relative performance remains underwhelming, with 2023 revenue levels below 2019 and EBIT margins below 2019.

The analyst expects the company’s FY24 EPS to be $1.75 and FY25 EPS to be $1.69.

BofA Securities: Hutchinson sees continued risk to sales and profitability for the company, given structural challenges within the department store sector.

According to the analyst, sales have softened in May, but most of the quarter is ahead due to the contribution from the Anniversary Sale (will benefit 2Q sales by 200bp).

The analyst added that new stores are performing above expectations, underscoring that management reiterated expectations for 22 new Racks this year.

The analyst maintained F24E EPS of $1.75, lowering FY27 EPS to $1.63 from $1.64.

Price Action: JWN shares are trading higher by 4.66% to $22.01 at last check Friday.

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Posted In: JWN