Nordstrom, Inc. (NYSE:JWN) reporting better-than-expected third quarter financial results earlier this week wasn't enough to satisfy analysts at UBS, who reiterated their ‘Sell’ rating on the stock.
“We believe weak sales will cause earnings misses which pressure the stock,” the analysts wrote in a note to clients.
“We remain skeptical Nordstrom can sustainably deliver earnings above the Street’s estimates over the next 12 months. Our 2024 financial year earnings per share (EPS) is about 50% below consensus.”
They believe Nordstrom will continue to lose market share to online pure-play platforms, competing off-price retailers such as TJX Companies Inc (NYSE:TJX), and brands’ direct-to-consumer channels.
“Given such dynamics, as well as our view the US softgoods environment will further deteriorate, we think Nordstrom’s near- to medium-term EPS margin trajectory will be weaker than the margin anticipates.”
However, they upped their price target on the stock from US$11 to US$12 which was the result of them tweaking the valuation multiple used in their analysis on Nordstrom’s improved gross margin outlook.
Nordstrom shares had added 5.9% at about US$15 at Friday’s close and have gained 1.3% week-over-week.
They also raised their 2023 financial year EPS estimate by 6% or $0.10 on Nordstrom’s $0.16 EPS beat for 3Q.
“We continue to think the challenging macro environment will drive weaker consumer spending during the 4Q holiday season,” the UBS analysts wrote.
“This will weigh on Nordstrom’s topline growth, in our view, but we note Nordstrom’s improved inventory positioning and easier year-over-year comparisons should help offset some impact.”
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