American luxury department store chain Nordstrom, Inc. (NYSE:JWN) reported weak holiday season sales for the nine weeks ending December 31, 2022, which dipped 3.5% compared to the nine weeks ending January 1, 2022. The retailer had to mark further reductions on merchandise to get rid of its excess inventory, which hurt its margins.
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What’s worse, Nordstrom reduced its Fiscal 2022 guidance, with revenue growth expected at the lower end of its outlook of 5% to 7%. Moreover, the adjusted earnings per share figure is now pegged between $1.50 to $1.70, down from the previous guide of $2.30 to $2.60. Also, adjusted earnings before interest and tax (EBIT) margin is projected to fall between 3.1% to 3.3% (previous guide 4.3% to 4.7%). Following the news, JWN stock fell 4.9% in the after-hours trading session on January 19.
On the brighter side, the retailer expects to start Fiscal 2023 with healthier inventory levels. By the end of Fiscal 2022, inventory levels are expected to be down by double-digit percentages compared to the prior year and in the range of 2019 levels. Heading into Fiscal 2023, the company plans to buy inventory conservatively and have a faster turn, enabling the retailer to react efficiently to changing consumer preferences.
Commenting on the numbers, CEO Erik Nordstrom said, “While we continue to see greater resilience in our higher income cohorts, it is clear that consumers are being more selective with their spending given the broader macro environment.”
Nordstrom is slated to release its Fiscal fourth quarter 2022 earnings results on March 2, 2023. So far in 2023, JWN stock has gained 10.7% vis-à-vis losing 13.6% in the past year.
Is Nordstrom Stock a Buy or Sell?
Analysts remain bearish on the retail sector owing to the uncertain macro backdrop and shifting consumer behavior. Currently, on TipRanks, JWN stock has a Moderate Sell consensus rating. This is based on one Buy, five Holds, and four Sell ratings during the past three months. The average Nordstrom price forecast of $19.17 implies 9.9% upside potential to current levels.
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