Nordstrom’s stock soars, but there are doubts about its ability to meet its own outlook

Nordstrom Inc.’s stock soared nearly 39% in Wednesday’s trading after the luxury department store retailer reported a fourth-quarter profit overrun, but some analysts are questioning the company’s ability to meet the expectations it has set for itself.

Nordstrom JWN,
+40.13%
forecasts revenue growth of 5% to 7% for fiscal 2022 and earnings per share of $3.15 to $3.50. The FactSet consensus forecasts revenue of $15.549 billion, implying growth of 5.1% and EPS of $2.96.

“[T]The guidance is based on the expectation that revenue growth will be driven by improved Nordstrom Rack performance and steady Nordstrom growth,” said Anne Bramman, Nordstrom’s chief financial officer, on the call. results, according to a FactSet transcript.

“And that really leverages our go-to-market strategy and all the advances we have in merchandising, as well as some of the work we’ve done in category management and improving the supply chain. supply at all levels.”

But UBS analysts have doubts.

“[W]We believe this guidance assumes improved gross margin and strong SG&A leverage year over year,” the analysts said.

“We believe this will be difficult for Nordstrom to achieve as it likely faces macroeconomic headwinds, a much more promotional environment and major cost inflation pressure in FY22.”

Among the headwinds that UBS analysts have identified for companies in the goods and services sector are the actions of the Fed and the shift in consumer spending to services rather than goods.

To see: Powell announces 25 basis point rate hike at policy meeting in two weeks

UBS is pricing the sale of Nordstrom shares with a price target of $12.

JPMorgan maintained its underweight rating but raised its price target $1 to $24.

“With the current context potentially ‘as good as it gets’ for Nordstrom’s $100,000+ Basic Household Income Customer[…] and on the pricing/promotions front […] Nordstrom’s absolute and relative performance remains disappointing with 2021 revenue levels lower than 2019 with EBIT margins 200 basis points lower than 2019,” the analysts said.

But other groups of analysts are more optimistic.

“We believe Nordstrom’s ‘closer to customers’ strategy, digital integration with stores, and history of helping create innovative new brands are competitive advantages,” Cowen wrote.

“We are cautiously optimistic about EBIT margin acceleration next year as Nordstrom optimizes inventory and store management against digital channels.”

Cowen rates Nordstrom’s stock market performance with a price target of $30, down from $25 previously.

This “closer to customers” strategy includes leveraging physical stores to better engage with customers across physical and digital channels, according to chief executive Erik Nordstrom, who also spoke on the earnings call.

Also: Farfetch stock soars as luxury e-tailer moves away from markdowns and into full-year profit

Credit Suisse maintained its neutral rating, but raised its price target to $29 from $26.

And BMO Capital Markets retained its market performance rating, but moved its price target from $23 to $30.

“If the FY22 EPS forecast is a new base level, stocks look attractive even after the after-hours surge. If on the other hand, FY22 is a blip, and we’re back to their
downward fundamental trajectory, questions remain,” wrote the analysts led by Simeon Siegel.

Nordstrom stock is down 27.7% over the past year while the S&P 500 SPX index,
+1.96%
gained 13.3%.

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