After a wave of great retail earnings reports,
fiscal second quarter results weren’t enough to win over Wall Street. An analyst at JPMorgan said the background may not get much better for the retailer.
Nordstrom (ticker: JWN) stock fell 18% in trading on Wednesday to $31.18. The S&P 500 index rose 0.2%. The move wiped out all but 1% of Nordstrom’s year-to-date gains.
While earnings and sales exceeded expectations, JP Morgan analyst Matthew Boss downgraded the stock from neutral to Underweight following Tuesday night’s report. Boss has set a price target of $34 in December 2022. His previous goal was a December 2021 goal at $39.
Boss noted a strong background for Nordstrom’s core customer with $100,000 or more in household income — including a mid-teens personal savings rate, the debt service ratio at its 40-year low, and wealth creation of more than $12 trillion in the US in 2020 – combined with a relatively low amount of promotional activity, it still delivered disappointing results compared to department store peers. Despite such positive developments, which Boss says may be “as good as it gets,” Nordstorm’s revenue was still lower than in the second quarter of 2019.
BMO Capital Markets analyst Simeon Siegel pointed to the 2019 comparison for the stock’s response. He wrote that the company’s anniversary sales surpassed fiscal 2019 comparable sales by just 1%. He thinks the company has made progress in its turnaround efforts, but believes the stock already reflects such efforts. Siegel has a Market Perform rating and a goal of $28.
BofA Securities analyst Lorraine Hutchinson expects the company’s earnings recovery to lag behind its competitors. She maintained an Underperform rating but raised her price target from $19 to $22. She said the rating reflects “the company’s weak sales and limited margin expansion potential.
“While Nordstrom and Rack sales improved sequentially, both remained below F19 levels,” she wrote, “a stark contrast to most other retailers who positively offset pre-pandemic levels.”
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