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Nordstrom Still in Red: Hits 52-week Low on Shutting Store

Zacks Equity Research

Nordstrom Inc. JWN stock is down for the last couple of days after it announced the closure of its full-line store at Horton Plaza Store in San Diego, CA. The stock also hit a 52-week low of $35.01 on Jun 27, before it recovered slightly to close down 2.5% at $36.20.

That’s not all. The stock has been underperforming for quite a while due to the intense competition, weak margins and fall in mall traffic due to rise of e-commerce that has been plaguing the apparel industry. Nordstrom has lost nearly 27% year to date and about 51% in the past one year.

NORDSTROM INC Price

NORDSTROM INC Price | NORDSTROM INC Quote

Additionally, the leading fashion specialty retailer has been witnessing a downtrend in the Zacks Consensus Estimate and holds a Zacks Rank #5 (Strong Sell). The Zacks Consensus Estimate of $2.55 and $2.87 for fiscal 2016 and fiscal 2017 has dropped 19.8% and 18.2%, respectively, over the past 60 days. Moreover, the Zacks Consensus Estimate for the second quarter has decreased 22.2% to 56 cents over the same time frame.

Coming to the company’s surprise history, it has underperformed the Zacks Consensus Estimate by an average of 15.7% in the trailing four quarters.

In the last quarter, the company’s top and bottom lines lagged estimates for the third straight time. Results were affected by lower-than-anticipated sales and the company’s decision to resort to greater markdowns to efficiently align inventory with the existing trends. Following a disappointing performance, the company lowered its outlook for fiscal 2016. Management now envisions fiscal 2016 earnings per share in the range of $2.50–$2.70, down from $3.10–$3.35 expected earlier.

However, the company’s strong brand image, amendments to its operating model to generate cost savings, and continuous store expansion endeavors remain the primary driving factors. While Nordstrom’s strategic investments should help it deliver sustainable, profitable growth over the long term. We cannot ignore the fact that the aforementioned troubles in the apparel industry will drag the company’s performance at least in the near term.

In the meantime, other stocks from the same industry include Christopher & Banks Corp. CBK, sporting a Zacks Rank #1 (Strong Buy), The Children's Place Inc. PLCE and Destination XL Group Inc. DXLG, both carrying a Zacks Rank #2 (Buy), can be solid bets.

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