Nordstrom (JWN) shares falls after 'unsurprising' guidance cut

After the close on Thursday, Nordstrom (NYSE: JWN) released its holiday sales performance and updated its fiscal 2022 guidance, revealing softer sales over the Christmas period.

The retailer reported a 3.5% fall in net sales for the nine-week holiday period ended December 31, while it also cut its adjusted EPS guidance to a range between $1.50 and $1.70 from the prior outlook of $2.30 to $2.60. In addition, annual revenue growth is expected at the low end of its previously issued outlook of 5% to 7%.

Following the announcement, Nordstrom shares tumbled, down around 7% premarket.

Morgan Stanley analyst Kimberly Greenberger said in a note that the firm "find this outcome unsurprising against recent data points & a high bar embedded in prior guidance." Greenberger cut the firm's price target on the stock to $19 from $21, maintaining an Underweight rating.

Meanwhile, Dylan Carden, an analyst at William Blair, told investors in his note that "management had signaled in early December that it would likely see revenue toward the lower end of expectations, within a deeper-than-expected promotional environment."

"And yet, the incremental downside here, in our view, reflects the continued and seemingly chronic underperformance of the Rack banner as well as the incremental and more sizable margin hit. We believe management faces an increasing credibility deficit," added Carden, who has a Market Perform rating on the stock.

Piper Sandler analyst Edward Yruma maintained a Neutral rating and $20 per share price target on Nordstrom but said the negative announcement affirms the firm's thesis from its previous downgrade.

"As we called out in the downgrade report, markdowns were running high and JWN extended the semi-annual sale by seven days. We believe that the high-end may be undergoing a cyclical slowdown and W.O.T. trends (work, going "out", travel) will be less of a tailwind in 2023. We remain
broadly cautious on our more premium coverage," writes Yruma.

At KeyBanc Capital Markets, Noah Zatzkin cut the firm's price target on the stock to $22 from $30, keeping an Overweight rating on the shares. He said in a research note that while they are disappointed by the holiday results, they believe the "revised guidance should help further reset expectations into 2023 and believe JWN's clean inventory position (expect to end the year down double digits) will set JWN up well relative to peers entering the year."

Finally, Jefferies analyst Ashley Helgans cut the firm's price target on Nordstrom to $22 from $24 per share, keeping a Buy rating on the stock. The analyst said the "profit reduction for Q4 is disappointing, but is based on temporary factors."

"We think investors should focus on the co's much improved inventory position, crucial for driving sales and margin performance in 2023. Rack takes a small step back vs. 2019, but remains on track for self-help improvements," said Helgans.

By Sam Boughedda

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