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Like Its Peers, Nordstrom Is Struggling to Up Shareholder Value

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Stock plummets in 2016

Nordstrom’s (JWN) stock price has fallen by 18.7% on a year-to-date (or YTD) basis to $40.74 as of August 2, 2016. According to a report by Bloomberg, certain analysts’ concerns about weak department store sales negatively impacted the stock prices of Nordstrom and its peers on August 2.

Nordstrom, Macy’s (M), JCPenney (JCP), and Kohl’s (KSS) fell by 6.9%, 7.2%, 4.4%, and 7.9%, respectively, on August 2.

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Movement since 1Q16 results

Nordstrom’s stock price has fallen by 9.9% since the announcement of its 1Q16 results in May 2016. Nordstrom missed analysts’ consensus sales and earnings estimates in 1Q16. The company lowered its fiscal 2016 outlook following its dismal performance in 1Q16.

Nordstrom’s peers Macy’s and Kohl’s also struggled in 1Q16. An uncertain retail environment, intense competition from online retailers, strong established off-price retailers such as TJX Companies (TJX), and a highly promotional environment have adversely impacted the performances of Nordstrom and other department stores.

Department stores are focusing on enhancing their digital channels to boost their sales. Some department stores have also expanded into the off-price space. Macy’s marked its entry in the space through its Macy’s Backstage stores in 2015.

Kohl’s also launched its first Off/Aisle store in 2015. Nordstrom launched its first Nordstrom Rack store in Seattle in 1973 as a clearance outlet for its full-line stores. At the end of fiscal 1Q16, Nordstrom operated 200 Rack stores.

The SPDR S&P Retail ETF (XRT) has 7.1% exposure to department stores and 1.2% exposure to Nordstrom.

Series overview

Nordstrom is scheduled to announce its fiscal 2Q16 results on August 11, 2016. Analysts expect the company’s sales and earnings to fall in the quarter.

In this series, we’ll discuss the company’s sales expectations, its earnings, and its off-price Rack stores’ sales and margins. We’ll also discuss analysts’ recommendations and the company’s valuation prior to its fiscal 2Q16 results.

Let’s start with a discussion of Nordstrom’s sales.

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