Nordstrom Inc. plans to revolve around its discount Rack banner, the company is having trouble finding merchandise from the high-end brands that customers covet.
Shares of the luxury department store retailer fell 29% in Wednesday trading after reporting a third quarter earnings missed. Supply chain challenges are compounding the company’s problems, with low inventories of women’s clothing and footwear at Nordstrom Rack, but there’s more to it.
“While many retailers are dealing with macro-related supply chain disruptions, Rack faces a unique challenge that is the discounted purchases of the top brands we make. at Nordstrom is particularly difficult in an environment with manufacturing constraints and lower product clearance levels,” said Erik Nordstrom, the company’s chief operating officer, according to FactSet transcripts of the conference call. income proposal.
Shortages also hit the average retail unit retail price (AUR), which is down 4% from 2019.
Overall, Nordstrom Rack reports a 35% increase in sales compared to 2020, but an 8% decrease from 2019.
The company is making adjustments to its inventory strategy to make up for shortfalls in available premium goods, but analysts can’t agree on how optimistic Nordstrom is.
JPMorgan analysts maintained their underweight stock rating, noting that the company would be driven from the ideal position of Nordstrom’s “core $100k+ core household income customer.” ” currently in place, as well as a favorable pricing and promotional environment.
“The bigger picture, Nordstrom remains an absolute and relative underperformer amid support for the retail industry with remarkable Q3 results relative to its peers,” the analysts said. branch”.
JPMorgan has reduced its price target to $23 from $27.
Cowen analysts aren’t quite as optimistic, given the stock’s rating of the market’s performance. But analysts there also cut their price target, from $35 to $27.
“In our view, top concerns and opportunities include improving performance at Rack in inventory management and sorting, optimizing cost of sales & management, and making innovation through logistics and inventory movement challenges,” said analysts led by Oliver Chen.
“We are cautious Nordstrom is losing shoppers and wallet sharing to better performing retailers, and looking ahead can see the challenges of keeping shoppers coming back.”
KeyBanc Capital Markets rates Nordstrom stock as overweight with a $45 price target. Analysts note inventory issues and say the company is boosting efficiency in its operations.
“We believe Nordstrom, with its strong brand strength and strong management team, is undervalued at current levels,” the analysts said.
GlobalData thinks Nordstrom can also improve its fortunes by simply cleaning up its stores.
Neil Saunders, chief executive officer of GlobalData, wrote in a note: “Stores that used to be orderly and disciplined are now becoming a cluttered block with inventory from different seasons, creating an experience messy and uncomfortable”.
“This type of environment, more like Macy’s, is simply not conducive to selling the high-end products and brands for which Nordstrom is famous. In our view, a presentation becoming a seed is a sign that Nordstrom has lost its real business where the sales results are even worse than the headline numbers because Digital is generating double-digit growth. ”
Nordstrom stock is down 27.1% this year while the benchmark S&P 500
increased by almost 25% during this period.
https://www.marketwatch.com/story/nordstrom-stock-plummets-after-supply-chain-struggles-hit-the-high-end-inventory-at-the-off-price-rack-chain-11637774868?rss=1&siteid=rss Nordstrom shares plummeted after supply chain difficulties caused high-end inventory in the Rack chain to drop