Nordstrom ain’t what it used to be before the pandemic
Nordstrom experienced a number of stock downgrades and an 18-percent one-day sell-off after reporting that second quarter sales declined versus pre-pandemic 2019 levels and lagged behind many of its department store and off-price peers.
On the positive side, earnings and sales exceeded Wall Street’s estimates and Nordstrom raised its full-year revenue growth guidance from 25 percent to 35 percent.
Compared to the second quarter of 2019, however, Nordstrom’s company-wide sales still decreased six percent with a decline of five percent at the full-line Nordstrom brand and eight percent at Nordstrom Rack. By comparison, comps rose 5.8 percent at Macy’s, 14 percent at Dillard’s and 20 percent at TJX Cos. Net sales on a two-year stack improved 1.3 percent at Kohl’s and 21 percent at Ross Stores.
Full-year operating margins were also guided down 200 basis points versus 2019 which some analysts saw as an indication of challenges Nordstrom has faced raising average selling prices versus competitors.
On an analyst call, Erik Nordstrom, CEO, highlighted that Nordstrom now has four consecutive quarters of sequential improvement in sales trends for both its Nordstrom and Nordstrom Rack banners.
He highlighted progress under its “Closer to You” program that includes a heightened focus on integrating online and both banners in major markets; adding price-oriented offerings in active, home and kids at Rack; and expanding its digital-first approach. Online sales grew 24 percent over the second quarter of 2019 to account for 40 percent of sales.
Supply chain disruption may be impacting Nordstrom more than competitors as Rack particularly faced women’s apparel and footwear shortages. Daniela Nedialkova, at Atlantic Equities, wrote in a note, “Given for a number of quarters now, the recovery pace has lagged peers, we expect more structural questions around vendor relationships may emerge.”
J.P. 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 higher-income consumer should be eager to spend with the economy normalizing and on the pricing and promotion front. Mr. Boss wrote in a note, “Nordstrom’s absolute and relative performance remains underwhelming.”
- Nordstrom Reports Second Quarter 2021 Earnings, Raises Fiscal Year Outlook – Nordstrom
- Nordstrom (JWN) Q2 2021 Earnings Call Transcript – The Motley Fool
- Closer to You – Nordstrom
- Nordstrom Reports Second Quarter 2021 Earnings, Raises Fiscal Year Outlook – CNBC
- Nordstrom stock drops 17 percent after quarterly sales fall versus 2019 – MarketWatch
- 5 Nordstrom Analysts Break Down Q2 Earnings: ‘Significant Lag Vs. Softline Peers’ – Benzinga
- Morgan Stanley Warns Of Further Downside to Nordstrom Stock – Benzinga
- Nordstrom Reports Q2 Improvements, Raises Outlook Amid Headwinds – WWD
- Nordstrom is determined to get closer to its customers – RetailWire
- Moody’s downgrades Nordstrom senior unsecured rating to Ba1 with a stable outlook – Moody’s
DISCUSSION QUESTIONS: What do you suspect is causing underperformance at both the Nordstrom full-price chain and Nordstrom Rack? How confident are you that management has strategies in place to regain top-line momentum?