Morgan Stanley Warns Of Further Downside to Nordstrom Stock

Nordstrom, Inc’s JWN revenue recovery journey is likely to be prolonged and cost inflation is expected to exert margin pressure, according to Morgan Stanley.

The Nordstrom Analyst: Kimberly Greenberger downgraded the rating for Nordstrom from Equal-Weight to Underweight, while reducing the price target from $36 to $27.

The Nordstrom Thesis: Despite the 18% decline in Nordstrom’s stock following the release of second-quarter results, there seems to be a further downside, Greenberger said in the downgrade note.

“JWN's sales underperformance is even more noticeable at the Rack division, which declined — 8% vs.2Q19, due to supply chain disruption and inventory shortages,” the analyst noted. She added that other off-price retailers facing the same challenges “were able to grow revenue in the low-20's% range vs. 2019.”

“JWN's relative underperformance in the midst of an extremely favorable macro backdrop leaves us cautious. As such, we do not see a clear path back to 2019 profitability and remain skeptical about longer-term growth,” Greenberger added.

JWN Price Action: Shares of Nordstrom had declined by 8.45% to $28.51 at market close Thursday.

Photo: Courtesy Nordstrom