Nordstrom (JWN) PT Lowered to $21 as BofA Securities Sees Delayed Impact From Cost Increases

May 25, 2022 7:01 AM EDT
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Price: $23.27 --0%

Rating Summary:
    5 Buy, 26 Hold, 7 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 4 | Down: 11 | New: 40
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BofA Securities analyst Lorraine Hutchinson lowered the price target on Nordstrom (NYSE: JWN) to $21.00 (from $26.00) believing there is risk to margin guidance despite GM increasing nearly 2 percentage points y/y. 1Q EPS of ($0.06) beat consensus of ($0.10) on stronger sales as consumers refreshed wardrobes for social events, travel, return to office, and spring/summer. Management hasn’t seen inflationary cost pressures adversely impact customer spend, likely due to the higher income profile of the customer base. Nordstrom sales increased 7.6% vs F19 (vs flat last quarter), and Rack sales declined 3.6% vs F19.

The analyst reiterated an Underperform rating, stating "we think macro pressures will likely put earnings at risk, particularly in 2H." "Markdown levels were in line with company expectations (exited 4Q with inventory up 19% vs F19). While there are still some inventory pockets that will likely need to be addressed in 2Q, management is comfortable with the current levels & composition, and is opportunistically using pack & hold. The company continued to raise prices in response to inflationary pressures and higher tickets from vendors. We are modeling F22E GM up 28bp to 35.4%. SG&A leverage was led by supply chain enhancements, though we expect product distribution, labor, and carrier costs to weigh on margins from here."

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