Mixed Signals: Nordstrom Beats Q2 Estimates But What's Behind This Analyst's Lowered Price Target?

Telsey Advisory Group analyst Dana Telsey lowered the price target of Nordstrom Inc JWN to $19 from $21 and reiterated a Market Perform rating. 

The analyst believes that although JWN beats Q2 earnings estimates, trends are decelerating in Q3. 

Yesterday, the company reported Q2 EPS of $0.84, which beat the analyst consensus estimate of $0.45, and sales of $3.77 billion, beating the analyst consensus estimate of $3.65 billion.

The analyst notes that despite the sizable beat in Q2, JWN reiterated its FY23 outlook of revenue decline of 4%-6% Y/Y (vs. consensus estimate of a decline of 5%) and EPS of $1.80-$2.20 (vs. consensus of $1.98).

Telsey sees sales trends decelerating at the beginning of August across JWN's two banners on weaker traffic and additional company-specific merchandising issues across its banners, mainly the women's apparel category.

The analyst believes the trend could suggest a slowdown once merchandise returns to full price after the Anniversary Sale. 

Nevertheless, the analyst expects the company to benefit from the absence of the Rack fulfillment changes seen in Q3 FY22 and 200 bps from the Anniversary Sale shift. 

The analyst continues to expect an FY23 sales decline of 5.0% Y/Y to $14.31 billion and an EPS estimate of $2.00.

Telsey estimates FY24 net sales growth of 2.2% Y/Y to $14.61 billion and EPS of $2.10.

Also, Citigroup reduced its price target to $18 (from $20), maintaining a Neutral rating, and UBS lowered its price target to $11 (from $12) and reaffirmed a Sell rating. 

Price Action: JWN shares are trading lower by 9.39% at $15.24 on the last check Friday.