Nordstrom is not what it was before the pandemic – RetailWire
Sep 07, 2021
Nordstrom saw a number of stock downgrades and an 18% sell-off in one day after reporting that second quarter sales have declined from pre-2019 pandemic levels and lagged behind many of its department stores and low-cost peers.
On the positive side, both earnings and sales exceeded Wall Street estimates, and Nordstrom raised its revenue growth forecast for the full year from 25% to 35%.
Compared to the second quarter of 2019, however, Nordstrom’s company-wide sales declined a further 6% with a decline of 5% for the full Nordstrom brand and 8% for Nordstrom Rack. By comparison, the compositions increased 5.8% at Macy’s, 14% at Dillard’s and 20% at TJX Cos. Net sales over a two-year stack improved 1.3% at Kohl’s and 21% at Ross Stores.
Operating margins for the full year were also guided down 200 basis points from 2019, which some analysts saw as an indication of the challenges Nordstrom faced in raising average selling prices by compared to its competitors.
On a analyst call, Erik Nordstrom, CEO, pointed out that Nordstrom now has four consecutive quarters of sequential improvement in sales trends for its Nordstrom and Nordstrom Rack banners.
He highlighted the progress made under his “Closer to You” program which includes an increased focus on online integration and two banners in major markets; the addition of price-driven offers in Active Activities, Home and Kids at Rack; and expand its digital-focused approach. Online sales grew 24% in the second quarter of 2019 to represent 40% of sales.
The disruption of the supply chain may have a bigger impact on Nordstrom than on its competitors, as Rack particularly faced shortages in women’s clothing and footwear. Daniela Nedialkova, Atlantic Equities, wrote in a note: “Given that for several quarters now the pace of the recovery has lagged behind its peers, we expect more structural questions regarding relationships with suppliers can emerge. “
JP Morgan’s Matt Boss, who downgraded Nordstrom’s stock to neutral, said the current environment should be “as good as it gets” for Nordstrom as its high-income consumers should be eager to spend with the normalization of economy and on the price and promotion front. Mr Boss wrote in a note: “Nordstrom’s absolute and relative performance remains disappointing.
DISCUSSION QUESTIONS: What do you think is causing the underperformance of both the Nordstrom full-priced chain and the Nordstrom Rack? How confident are you that management has strategies in place to regain revenue momentum?
“Purchases from Nordstrom may represent a slightly larger investment than the current hazy outlook allows.”