Nordstrom Dives to Lowest Since 2010 as Street Fears More Pain

(Bloomberg) -- Shares of Nordstrom Inc. slumped to their lowest since 2010 after the clothing retailer slashed its full-year outlook as changes to its loyalty program and merchandising misses resulted in declining sales for the second straight quarter.

“Nordstrom amplified industry pressures with strategic missteps," Telsey Advisory Group CEO Dana Telsey wrote. “However, the company believes these issues are correctable (although it will take some time)."

Shares tumbled as much as 11% Wednesday, and the stock was already down 44% from a November high when the market closed on Tuesday, just before the company’s release of results.

Telsey predicts that Nordstrom’s well-earned reputation for service will help it to overcome temporary setbacks and she sees a number of catalysts this year that include the opening of the New York flagship store and a bounceback in digital growth. She dropped her price target to $37 from $56 and kept her neutral-equivalent rating. Analysts are broadly in agreement with that recommendation, with Bloomberg data showing 5 buys, 16 holds and 3 sells.

Here’s what else Wall Street has to say:

Keybanc, Edward Yruma

Lowered his price target to $52 from $55 and said “changes in the loyalty program impacted results and merchandising missteps remain an ongoing issue” for Nordstrom, even as management plans to revamp its Nordy Club program back away from digital only in order to win back store traffic.

Rates overweight

Piper Jaffray, Erinn Murphy

Murphy remained cautious, lowering the price target to $33 from $40 amid worry over weak underlying trends and little clarity into any improvement in the second half of the year. “We are wary on the department store group as a whole with intensifying competitive pressures from Amazon/e-commerce in 2019/2020.”

Rates neutral

Morgan Stanley, Kimberly Greenberger

Dropped price target to $40 from $50 as management blamed the following for missing first-quarter expectations: “1) an unanticipated negative impact from reducing mailed promotional materials; 2) a deliberate reduction in digital marketing; and 3) an unbalanced assortment, including Women’s apparel, which continues to struggle in Full Price.”

Greenberger expects an eighth-straight year of operating margin compression, even though it may expand some in the second half of the year. She lowered her 2019 EPS estimate to $3.39 from $3.70 in anticipation of sales declines and a 34.4% gross margin.

Rates equalweight

Wedbush, Jen Redding

“While we believe that it is within management’s ability to rectify issues, with all data points inflecting negatively so quickly, deterioration continuing into May, and investors adjusting to less visibility on the horizon, we see the turnaround as likely paused for now.” Redding dropped her price target to $35 from $40 and said she’ll be watching the promotional atmosphere in the second quarter.

Rates neutral

To contact the reporter on this story: Sydney Maki in New York at smaki8@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Will Daley

©2019 Bloomberg L.P.