Nordstrom Q3 Sales Grow, But Analysts Remain Cautious On Stock Amid Slowing Sales And Elevated Inventory

Nordstrom, Inc. JWN shares are trading lower on Wednesday.

For the third quarter, the company’s net sales increased 4.6% compared to the same period in fiscal 2023, total company comparable sales increased 4.0%, and gross merchandise value increased 5.3%. 

JP Morgan analyst Matthew R. Boss reiterated the Underweight rating on the stock, raising the price forecast to $21 from $20.

The analyst notes that despite favorable conditions for Nordstorm’s core customer base, including high personal savings rates, low debt service ratios, and significant household wealth creation, as well as favorable pricing and promotional factors, the company’s absolute and relative performance remains disappointing, with 2023 revenue levels and EBIT margins falling below 2019 levels.

JWN opened 12 Rack stores during the quarter, reflecting a 2.2% growth, and has a total of 23 Rack store openings year-to-date, in line with its 2024 guidance of 20-25 openings, with 15 expected in 2025, Boss added.

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Telsey Advisory Group analyst Dana Telsey reiterated Market Perform rating on Nordstrom, raising the price forecast to $26 from $24.

The analyst notes that Nordstrom exceeded earnings expectations in the third quarter, driven by stronger sales, gross margins, and operating expense leverage.

Full-line segment growth was positive for the third consecutive quarter, and momentum at Rack continued.

However, despite this growth, management highlighted a slowdown in sales in late October and November.

As a result, Nordstrom cautiously raised its FY24 revenue growth outlook by 100 basis points, while keeping EBIT margin and EPS guidance unchanged. The company also noted elevated inventory due to slower-moving cold weather categories.

Given these factors, the analyst maintained a Market Perform rating. The analyst raised estimates to $2.00 in FY24, up from $1.95 previously. For FY25, the estimate goes to $2.06, up modestly from the prior estimate of $2.02.

Price Action: JWN shares are trading lower by 9.34% to $22.32 at last check Wednesday.

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