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Nordstrom's Prospects Bleak: Sell the Stock Now

Zacks Equity Research

Investors need to exercise caution when it comes to stocks as any incorrect decision may affect their portfolio returns. Exiting the underperforming stock at the right time safeguards your returns. Nordstrom Inc. JWN, a leading fashion specialty retailer, is one such stock that has been witnessing a downtrend in the Zacks Consensus Estimate and holds a Zacks Rank #5 (Strong Sell).

Nordstrom continued with its dismal run as it reported first-quarter fiscal 2016 results, wherein both top and bottom lines lagged estimates for the third straight quarter. The company posted quarterly adjusted earnings of 26 cents per share, which missed the Zacks Consensus Estimate of 45 cents and plunged 60.6% from the prior-year quarter figure of 66 cents.

The bottom line bore the brunt of lower-than-anticipated sales and the company’s decision to resort to greater markdowns to efficiently align inventory with the existing trends. Nordstrom’s total revenue of $3,249 million underperformed the Zacks Consensus Estimate of $3,293 million. Additionally, comparable store sales slipped 1.7%.

NORDSTROM INC Price and Consensus

NORDSTROM INC Price and Consensus | NORDSTROM INC Quote

Over the trailing four quarters, it missed the Zacks Consensus Estimate by an average of 15.7%. 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.

Consequently, the Zacks Consensus Estimate of $2.55 and $2.87 for fiscal 2016 and fiscal 2017 has dropped 63 cents and 64 cents, respectively, over the past 60 days. Moreover, the Zacks Consensus Estimate for the second quarter has decreased 16 cents to 56 cents over the same time frame.

Nordstrom operates in a highly fragmented specialty retail sector and faces intense competition from other well-established players. In order to retain its current market share, the company has to reduce its selling prices, which in turn may affect margins.

From the above analysis, it is quite apparent that Nordstrom may not be the right choice for your portfolio, at least for the time being.

Stocks to Consider

Some better-ranked stocks in the same industry include Destination XL Group, Inc. DXLG, The Children's Place, Inc. PLCE and Christopher & Banks Corporation CBK, each carrying a Zacks Rank #2 (Buy).

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NORDSTROM INC (JWN): Free Stock Analysis Report
 
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