Nordstrom (NYSE:) is a brick-and-mortar fashion retailer situated in North America.

Although the company has plans to digitalize the majority of their business, I still remain bearish due to the incremental flaws. (See JWN stock charts on TipRanks)

Performance

Nordstrom stock is trading down by 26% over the past six months.

The company beat its earnings estimates in Q2, recording quarterly revenue of $3.7 billion (a 96.8% year-over-year increase), in turn beating its EPS estimate by $0.21.

Although disposable income was high in the first part of 2021 it declined as people have less disposable income. This could lead to a lower top line.

With the emphasis placed on digitalization in the restructuring of the firm, lower operating costs could be an added value, however, current operating margins may not last.

Digitalization is a widespread industry phenomenon and does not distinguish Nordstrom from other retailers.

Nordstrom continues to face a significant amount of pressure from the likes of GAP, Limited Brands, Abercrombie & Fitch (ANF), and others.

Supply Chain Concerns

CEO Erik Nordstrom has mentioned that supply chain issues have hit Nordstrom hard, and that he thinks these constraints will probably affect the company for another six to 12 months.

He further believes that Nordstrom’s slower-than-anticipated growth could make it more difficult for the firm’s procurement managers to determine the level of inventory required going forward.

Key Metrics

Disappointing EV/EBIT (42.7) and forward PEG (23.2) ratios mean that growth in income statement line items are lagging the market.

Nordstrom is also struggling to provide value to shareholders with its forward diluted EPS anticipated to shrink by 11.1%, while its EPS growth for the next three to five years is expected to underperform its sector by 63.6%.

Wall Street’s Take

Wall Street remains divided on the stock, with two Buy ratings, three Hold ratings, and three Sell ratings assigned in the past three months. A JWN average price target of $37.13 suggests a 29.3% upside possibility.

Disclosure: Steve Gray Booyens had no position at the time this article was published.

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