Nordstrom Inc. shares plunged 17% in Wednesday trading after the luxury department store reported quarterly sales that show a 6% drop compared with 2019.
reported profit and sales that beat expectations. However, on a two-year stack, sales fell 6% versus fiscal 2019. The Nordstrom brand was down 5% compared with 2019 and the off-price Rack brand fell 8%.
Nordstrom says the Anniversary Sale shifted to the third quarter this year, driving down Nordstrom brand sales by about 300 basis points versus 2019, though sales exceeded that year’s levels.
On the earnings call, Erik Nordstrom, the retailer’s chief executive, said the Rack brand is undergoing a “merchandise repositioning” effort that is already showing results in the active, home and kids categories.
Department stores struggled before the pandemic, and saw apparel sales stall and stores close temporarily during the pandemic. But the most recent results from Macy’s Inc.
and Kohl’s Corp.
were better-than-expected and accompanied by outlook increases, driving shares up.
“With the current backdrop potentially ‘as good as it gets’ for both Nordstrom’s $100K+ core household income customer… and on the pricing/promotional front (lean channel inventory / industry AUR expansion) – Nordstrom’s absolute and relative performance remains underwhelming with full price revenues ~900 basis points below department store peers, Rack comps ~2,500 basis points below off-price peers, and management forecasting full year operating margins ~200 basis points below 2019,” wrote JPMorgan analysts in a note.
JPMorgan downgraded Nordstrom shares to neutral from overweight and lowered its target price to $34 from $39.
BofA Securities maintained its underperform stock rating though it raised its price objective to $22 from $19.
“We expect earnings misses and multiple contraction due to soft sales and a lack of margin expansion to result in share price underperformance,” analysts said.
Wedbush maintained its neutral stock rating and $35 price target.
“Despite an impressive beat and raise, results are below the high bar set in department stores by the likes of Dillard’s and Macy’s with Nordstrom seemingly
benefiting less from Covid tailwinds relative to the sector, likely disappointing
investors looking for signs of momentum owing to industry tailwinds, as well as
signs of fundamental improvement enough to spark a comeback,” analysts wrote.
Not all research groups were as downbeat. Jefferies maintained its buy rating and $48 price target.
And KeyBanc rates Nordstrom shares overweight with a $45 price target.
“Second quarter is unlikely to satisfy the near-term bulls given the continued expense pressure, but we think the Company made continued progress against its long-term initiatives, and we think further reinforced its position as the premier multibrand premium/luxury retailer,” wrote KeyBanc Capital Markets.
“Momentum continues to accelerate, which reinforces our upward bias to earnings forecasts.”
Nordstrom stock has edged up 0.4% for the year to date while the benchmark S&P 500 index
has gained 19.8% for the period.