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Nordstrom Continued to Decline after Unimpressive Q1 Results

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Stock in the red

Nordstrom (JWN) stock has fallen 27.5% on a YTD basis as of May 23. The upscale department store announced unimpressive results for the first quarter of fiscal 2019 after the financial markets closed on May 21. Nordstrom stock fell 9.2% on May 22 in reaction to the poor results and 1.6% on May 23. The broader market also declined on May 23 as the tensions related to US-China trade war escalated and dragged down the S&P 500 Index by 1.2%.

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Nordstrom and its department store peers reported dismal sales in the first quarter as their market share continues to be adversely impacted by the growing strength of online and off-price retailers. The recently announced increase in tariffs to 25% from 10% on $200 billion of Chinese imports and the possibility of another round of tariffs is expected to be another headwind for department stores and several other retailers.

Nordstrom’s first-quarter EPS fell 54.9% to $0.23 and significantly missed analysts’ expectation of $0.43. Lower sales and margin contraction adversely impacted the first-quarter bottom line. Nordstrom lowered its fiscal 2019 outlook after a challenging first quarter. The company now expects its fiscal 2019 EPS between $3.65 to $3.90 compared to the previous outlook range of $3.25 to $3.65. The lower earnings guidance reflects weak sales expectations in the current fiscal year.

Analysts’ reaction

Several analysts cut their price target for Nordstrom stock following its results:

  • Credit Suisse: $36 from $40
  • KeyBanc: $52 from $55
  • J.P. Morgan: $35 from $40
  • Deutsche Bank: $36 from $47
  • Citigroup: $37 from $48
  • Wedbush: $35 from $40
  • Telsey Advisory Group: $37 from $56
  • Cowen and Company: $36 from $44
  • Morgan Stanley: $40 from $50

As of May 23, the 12-month price target for Nordstrom stock was $38.81, which reflects an upside of 15%. Nordstrom is rated a “hold” by 17 out of 23 analysts while three analysts have a “buy” opinion. The stock is rated a “sell” by three analysts.

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