Nordstrom is seeing an early warning sign of an inventory problem, analyst says (JWN)
- Nordstrom on Tuesday posted holiday comparable sales growth that were in line with Wall Street estimation.
- But the retailer's comparable sales in full-price only grew 0.3%, below its expectations.
- "Softer full-price trends set the stage for higher 4Q markdowns and inventory worries," said Simeon Siegel, an analyst at Nomura Instinet.
- Watch Nordstrom trade live.
Nordstrom's disappointing holiday-sales results indicated a bigger inventory problem ahead, an analyst says.
The retailer on Tuesday said its comparable sales increased 1.3% for the nine weeks ended January 5, which was in line with its own expectations. Thanks to heavy discounts, Nordstrom's off-price same-store sales rose 3.9% year-over-year, also matching estimates. For full-price items, comparable sales only grew 0.3%, missing its forecast.
"Softer full-price trends set the stage for higher 4Q markdowns and inventory worries," Simeon Siegel, an analyst at Nomura Instinet, said in a note distributed Wednesday. "Inventory levels across the US landscape have been worse than they appeared."
As consumers are shifting to e-commerce sites, retailers are losing traffic in stores and have to use more discounts to attract online shoppers. But discounts are reducing the retailer's pricing power and make inventory management even harder, according to Siegel.
Nordstrom said that it will better position inventory levels by the end of the year and that it expects its annual earnings at the low end of its previously announced range of $3.55 to $3.65 a share. But Siegel said Nordstrom will only deliver $3.54 earnings per share when the financial results are out on February 28.
Siegel has a "hold" position and a $46 price target for Nordstrom, near where shares were trading after Wednesday's more than 6% drop.
Nordstrom isn't the only US retailer that has gotten hit after posting disappointing holiday sales. Rival Macy's plunged as much as 19% last Thursday after it slashed its sales and earnings guidance, citing a weak holiday period. Analysts at Deutsche Bank said that product mix and digital fulfillment may have added pressure to margins for US retailers.
Nordstrom was down 12% in the past year.
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