Nordstrom Shares Pull Back After Q1 Earnings: What Do Analysts Think?

Nordstrom, Inc. JWN shares fell by nearly 6% Wednesday after the company reported disappointing first-quarter earnings numbers and issued guidance that fell short of Wall Street’s expectations.

On Tuesday afternoon, Nordstrom reported a first-quarter EPS loss of $1.05, missing consensus analyst estimates of a 57-cent loss. First-quarter revenue of $3.01 billion exceeded consensus estimates of $2.9 billion. Revenue was up 41.9% from a year ago.

Related Link: Walmart Analysts Break Down Q1 Beat: 'Impressive Results Against Tough Comparisons'

Unfortunately, net sales remain down 13% compared to the same quarter in 2019, prior to 2020 pandemic store closures. Digital sales were up 23% from a year ago and 28% compared to 2019. The company said online sales now represent 46% of the company’s total sales.

Looking ahead, Nordstrom also reaffirmed its prior fiscal 2021 revenue growth guidance of more than 25%.

Nordstrom Margin Concerns: Credit Suisse analyst Michael Binetti said he is concerned about gross margins in the second quarter as Nordstrom faces a high-risk inventory situation.

“JWN is planning for a big Anniversary Sale in 2Q, with 1Q ending inventory up 32% YOY (-2% vs 1Q19, including a 700bp increase from inventory pulled forward to mitigate potential 2Q backlog issues) despite sales -13% to 1Q19,” Binetti wrote.

Bank of America analyst Lorraine Hutchinson said sales and margins remain lower than pre-pandemic levels.

“We remain concerned by the market share losses at department stores and expect earnings to remain below pre-pandemic levels,” Hutchinson wrote.

Nordstrom As A Reopening Play: Telsey Advisory Group analyst Dana Telsey said the weak first quarter highlights the challenges Nordstrom faces in its turnaround efforts.

“Overall, JWN’s first quarter results were a bit disappointing, in our view, despite what we saw as a favorable set-up given the better-than-expected results reported by many of its peers benefiting from easier prior year compares and an improving macro environment (increased vaccinations, return of warmer weather, accelerating tax refund distributions, and another round of government stimulus),” Telsey wrote.

KeyBanc analyst Edward Yruma said Nordstrom still appears positioned as a late-stage economic reopening play.

“We believe the risk/reward is one of the most favorable in our coverage,” Yruma wrote.

Nordstrom Ratings, Price Targets:

• Credit Suisse has a Neutral rating and $39 target.
• Bank of America has an Underperform rating with a price target lifted from $16 to $19. 
• Telsey has a Market Perform rating and price target lowered from $44 to $36. 
• KeyBanc has an Overweight rating and $45 target.

JWN Price Action: Nordstrom shares lost 5.84% in Wednesday's session, closing at $34.37.