UPDATE: Nordstrom (JWN) PT Lowered to $22 at Morgan Stanley on Prospect of Cost Inflation

(Updated - November 26, 2021 7:11 AM EST)

Morgan Stanley analyst Kimberly Greenberger lowered the price target on Nordstrom (NYSE: JWN) to $22.00 (from $27.00) noting that shares fell -23% AMC on 3Q sales & margin results that missed consensus expectations and lagged peers, making it less likely management will hit the 6% EBIT margin target.

The analyst reiterated the Underweight rating, stating "Our key concerns coming out of the 3Q print are 1) management's effective 2020 cost cutting efforts have been more than offset by higher discretionary spending and cost inflation in labor & eCommerce fulfillment, potentially putting management's operating margin expansion targets out of reach, and 2) Rack's mis-execution underscores our view that Rack does not operate like an off-price retailer. Off-price retailers TJX, ROST & BURL all delivered 22-30% 3Q revenue growth vs. LLY and maintained full in-stock levels as they were able to acquire more than their fair share of inventory available in the marketplace. Instead Rack operates as a discount department store, with the same long-term structural headwinds. We struggle to find a viable path to JWN's 6% EBIT margin target given well understood labor and fulfillment cost inflation that is likely to be sticky."

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