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Nordstrom, Inc. Posts Mixed Q3 Results; Shares Tank 27%

Nordstrom, Inc. (JWN) shares fell 27% during the after-hours trading session on November 23, after the American omnichannel retailer reported mixed Q3 results, significantly missing earnings expectations.

Despite more customers returning to the physical stores, the company’s profitability continues to be negatively impacted by supply-chain disruptions.

Q3 Performance

Adjusted earnings of $0.39 per share fell 13 cents short of analysts’ expectations of $0.52 per share. The company reported earnings of $0.34 per share for the prior-year period.

Net sales jumped 18% year-over-year to $3.53 billion, slightly exceeding consensus estimates of $3.52 billion.

Meanwhile, gross profit expanded 230 bps to 35% driven by lower markdowns and higher net sales. (See Nordstrom stock charts on TipRanks)

Guidance

The Company reaffirmed its financial guidance for fiscal 2021. The company continues to project revenues to grow by over 35% year-over-year. Furthermore, it expects earnings before interest and taxes (EBIT) margin to range between 3-3.5% of sales.

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CEO Comments

Nordstrom CEO, Erik Nordstrom, commented, “We’re taking action to improve performance at Nordstrom Rack, including optimizing inventory levels, better balancing price points and increasing brand awareness. Work is also underway to improve merchandise margin across the Company and ensure we have the visibility and flexibility we need to serve our customers seamlessly, despite global supply chain challenges.”

Wall Street’s Take

Following the Q3 miss, Jefferies analyst Stephanie Wissink downgraded Nordstrom’s rating to Hold from Buy, and reduced the price target to $30 (7.2% downside potential) from $48.

The downgrade is based on Wissink’s concerns regarding the rising transformation costs, poor execution, and a shift to a 50/50 physical and digital sales model.

Overall, the stock has a Hold consensus rating based on 2 Buys, 5 Holds, and 2 Sells. At the time of writing, the average Nordstrom price target of $36.56 implies 13% upside potential from current levels.

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