Nordstrom Looks Like a Cheap Play on High-End Retailing

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Ben Gabbay/Getty Images for Nordstrom

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This article is an excerpt from Barron’s 10 preferred stocks for 2022. Click here to see the full list.

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Nordstrom looks like a cheap play on high-end retailing. At about $20, the stock trades at a discount to nearly all of its peers, based on its enterprise value (market value and net debt), for about 10 times expected 2022 earnings and only 50% of sales.

Evercore analyst Omar Saad is among the few Wall Street bulls on Nordstrom (ticker: JWN). He sees a favorable risk/reward. He forecasts $2.20 in 2022 earnings and says the stock could be worth around $20 even if profits drop to $1.50. In a bullish scenario in which margins and sales exceed expectations, Nordstrom could earn $4 per share and the stock could hit a March high of $46.

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The company derives 40% of its sales online and has rationalized its physical footprint to approximately 100 full-service stores, using smaller neighborhood stores in urban areas for online pickup, returns and transformation.

Given its family’s control, Nordstrom is apt to resist any attempt by active investors to shut down its online business, as is facing Macy’s (M) and Kohl’s (KSS).

Still, a deal isn’t in question for the company, given the digestible market value of a little over $3 billion.

Write to Andrew Berry at [email protected]

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