Nordstrom stock plummets after supply chain struggles hit the high-end inventory at the off-price Rack chain

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Nordstrom Inc. plans to roll out its off-price Rack banners, eliminating problems customers have with finding merchandise from premium brands they love.

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Shares of the luxury department-store retailer were down 29% in Wednesday trading after posting slashed third-quarter earnings. With low inventory levels in women’s clothing and shoes at Nordstrom Rack, supply-chain challenges are adding to the company’s problems, but there’s more to it than that.

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“While many retailers are dealing with macro-related supply chain disruptions, Racked faces a unique challenge as we at Nordstrom make off-price purchases from the same top brands that face production bottlenecks and lower levels of clearance product. are particularly difficult in the atmosphere.” Eric Nordstrom, the company’s chief executive officer, said, according to a FactSet transcript of the earnings conference call.

The shortfall also hurt the average unit retail (AUR), which is down 4% compared to 2019.

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Gap stock fell as supply-chain disruptions are expected to result in up to $650 million in sales losses

Overall, Nordstrom Rack reported sales that were up 35% compared to 2020, but down 8% compared to 2019.

The company is making adjustments to its inventory strategy to make up for the lack of premium items available, but analysts can’t agree how excited to be about Nordstrom’s JWN,
-28.72%
possibilities.

Analysts at JPMorgan maintained its undervalued stock rating, noting that the company should receive a boost from the ideal position that “Nordstrom’s $100K+ core household income customer” currently occupies, and the beneficial pricing and promotional environment. .

“The bigger picture, Nordstrom remains an absolute and relative underperformer for retail with remarkable 3Q results versus peers in a supportive backdrop,” analysts said.

JP Morgan lowered its price target from $27 to $23.

Cowen analysts are not as downbeat with the performance of stock ratings in the market. But analysts there also lowered their price target from $35 to $27.

And: Macy’s New Marketplace Might Raise Calls to Separate Its E-Commerce Business, Says One Analyst

Analysts led by Oliver Chen wrote, “In our view, top concerns and opportunities include improving execution across racks in inventory management and assortment, optimizing SG&A, and working creatively through logistics and inventory flow challenges.” ”

“We are cautious that Nordstrom is losing buyers and wallet share to outperforming retailers, and may face winning challenges for buyers looking forward.”

KeyBanc Capital Markets rated Nordstrom stock overweight with a $45 price target. Analysts noted inventory problems and said the company was increasing efficiencies in its operations.

“We believe Nordstrom, with its powerful brand strength and strong management team, is underreported at current levels,” analysts said.

GlobalData thinks Nordstrom can improve its fortunes just by cleaning up its stores.

“Shops that were once clean and disciplined are now creating a chaotic and unpleasant experience with a variety of seasonal stocks,” Neil Saunders, managing director of GlobalData, wrote in a note.

Don’t miss: TJ Maxx beats parenting earnings expectations, says holiday inventory versus pre-COVID

“This kind of environment, which is similar to Macy’s, is not conducive for Nordstrom to sell well-known premium products and brands. In our view, the presentation is a sign that Nordstrom has lost grip on its physical business – where sales The results are worse than the headline number as digital is generating double-digit growth.”

Nordstrom stock is down 27.1% for the year so far, while the benchmark S&P 500 index SPX,
-0.06%
An increase of about 25% for this period.

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