Goldman Sachs downgraded Nordstrom (JWN) stock today to “sell” from “neutral” as it expects a tough retail environment to hurt its performance this year. These hurdles include challenges posed by tariffs and headwinds specific to the company, like weakness in its full-price business.
Nordstrom disappointed investors when it reported lower-than-expected revenue and earnings for the first quarter of fiscal 2019 in May 2019. Nordstrom’s first-quarter adjusted EPS declined 54.9% to $0.23 and fell terribly short of analysts’ forecast by 20 cents. Nordstrom’s first-quarter revenue fell 3.3% due to soft sales trends and missteps with its loyalty program.
Nordstrom’s first-quarter gross margin declined by 60 basis points as the company used markdowns to clear its inventory. The company’s operating margin fell about 212 basis points, mainly due to deleveraging expenses on lower sales.
Currently, analysts expect Nordstrom’s adjusted EPS to decline 8.0% to $3.32 in fiscal 2019, which ends on February 1, 2020. Analysts expect the company’s revenue to fall 1.1% to $15.7 billion in fiscal 2019.
In May, Nordstrom stated that it expects soft sales trends to continue in the second quarter and for the situation to improve in the second half of fiscal 2019. Amazon (AMZN) and other online retailers have disrupted the business of traditional retailers. Nordstrom and its department store peers have been heavily investing in their digital channels and other growth initiatives to boost their top line. But these investments have been pressuring the profitability of department stores.
Also, uncertain macro conditions, including the US-China trade war, represent additional headwinds for Nordstrom and peers.