Nordstrom, Inc. (JWN) shares experienced a significant downturn on Wednesday, plunging 9.34% to $22.32, despite reporting better-than-expected third-quarter results. While the company showcased positive growth in several key metrics, conflicting analyst perspectives have left investors uncertain about the future trajectory of the stock.
The retailer reported a 4.6% increase in net sales compared to the same period in fiscal 2023, with total company comparable sales up 4.0% and gross merchandise value climbing 5.3%. This positive performance was fueled by factors such as high personal savings rates, low debt service ratios, and substantial household wealth creation among Nordstrom’s core customer base. Favorable pricing and promotional strategies also contributed to the improved results. Furthermore, the company’s expansion continued, with the opening of 12 new Rack stores during the quarter, keeping them on track to meet their 2024 guidance of 20-25 new store openings.
However, this positive financial picture is countered by a divergence in analyst opinions. JP Morgan analyst Matthew R. Boss maintained an Underweight rating on JWN stock, raising the price target to $21 from $20. Boss expressed disappointment with Nordstrom’s absolute and relative performance, noting that 2023 revenue levels and EBIT margins lagged behind 2019 figures, despite the favorable economic conditions benefiting the company’s target demographic. This perspective underscores a concern that the company isn’t capitalizing fully on the current market opportunities.
In contrast, Dana Telsey of Telsey Advisory Group reiterated a Market Perform rating, raising the price target to $26 from $24. Telsey acknowledged Nordstrom’s exceeding of earnings expectations, driven by strong sales, improved gross margins, and effective operating expense management. The analyst highlighted the positive momentum in both the full-line segment and the Rack division, noting that the full-line segment showed positive growth for the third consecutive quarter. Nevertheless, Telsey also pointed to a slowdown in sales during late October and November, prompting Nordstrom to cautiously adjust its FY24 revenue growth outlook upward by 100 basis points while maintaining its EBIT margin and EPS guidance. The analyst also cited elevated inventory levels due to slower-moving cold-weather apparel as a contributing factor to the cautious outlook.
The contrasting views highlight the complexity of interpreting Nordstrom’s performance. While the company delivered solid Q3 results, concerns remain regarding the sustainability of this growth given the recent sales slowdown and high inventory. This uncertainty, coupled with the differing analyst price targets, creates a volatile environment for JWN shares, leaving investors to carefully weigh the positive and negative factors before making investment decisions. The significant drop in the stock price reflects the market’s current reaction to this mixed bag of news.
