Nordstrom Is A Great Company, But Stifel Is Cautious Near Term; Downgrades

Stifel’s Richard E. Jaffe believes Nordstrom, Inc. JWN's “holiday results will prove to be weaker than previously anticipated, contributing to a more challenging start to 2017.”

Jaffe downgraded the rating on the company from Buy to Hold, while lowering the price target from $62 to $40.

Disappointing Holiday Season

The analyst mentioned that the sales weakness reported across the sector, along with “extreme” promotional activities to drive sales, as well as the “unevenness” of apparel sales through the holiday season led to an intensely competitive and “generally disappointing” holiday period for apparel retailers.

Jaffe noted that there was limited visibility into any meaningful share price appreciation from the current levels, given that 2017 is likely to be a challenging year, driven by “1) a highly competitive and promotional environment for retail, 2) ongoing challenges from ecommerce and 3) a slowdown in consumer spending on apparel.”

Near-Term Concerns

The analyst believes that Nordstrom’s current share price already reflects expectations of improved results in the near term, especially as the company laps easier comps in Q1 and Q2.

However, Jaffe expressed concern that the results could miss expectations given the intensely competitive environment that is pressuring traffic, margin and sales — a trend unlikely to abate in the near term.

“Longer term, our outlook for JWN is favorable as it is a best in class retailer, with its great customer experience, inspiring merchandise assortments and a well integrated, synergistic and effective ecommerce business,” the analyst added.

At last check in Tuesday's pre-market session, shares were down 1.04 percent at $43.74.