Nordstrom Stock Plunges 14% After Cutting Guidance, Analyst 'Convinced' Shares are Overvalued

© Reuters. Nordstrom (JWN) Stock Plunges 14% After Cutting Guidance, Analyst 'Convinced' Shares are Overvalued

By Senad Karaahmetovic

Shares of Nordstrom (NYSE:JWN) are down about 14% in premarket Wednesday after the company slashed its full-year profit and revenue forecast.

JWN reported adjusted EPS of $0.81 on revenue of $4.10 billion to top the consensus of $0.80 on sales of $3.99 billion. Still, the company cut its full-year guidance for revenue growth as it now sees +5% to +7%, down from the prior range of +6% to +8%.

An adjusted EPS forecast is slashed to a range from $2.30 to $2.60 from $3.20 to $3.50. Analysts were looking for adjusted full-year EPS of $3.08. The EBIT margin is now seen between 4.3% and 4.7%, down from the prior 5.6% to 6%.

Erik Nordstrom, chief executive officer of Nordstrom, said the company delivered “solid results.”

“While our quarterly results were consistent with our previous outlook, customer traffic and demand decelerated significantly beginning in late June, predominantly at Nordstrom Rack. We are adjusting our plans and taking action to navigate this dynamic in the short term, including aligning inventory and expenses to recent trends, and we remain confident in our ability to deliver on our long-term strategic and financial goals,” he added.

A UBS analyst reiterated a Sell rating and a $12 per share price target as he believes it will be hard for the company to meet the Street’s EPS expectations. He added that the Q2 report only “increased our conviction in our Sell rating.”

“The downward inflection in the business in July and continuation of that trend in 3QTD gives us more conviction in our Sell thesis. We think the Street underestimates pressure on JWN earnings from share loss as consumers' move to online pureplay channels, retailers with better value-for-money propositions such as TJX (NYSE:TJX), and brands' own stores and websites. We think many underestimate how difficult it will be for JWN to re-leverage fixed costs,” the analyst wrote in a note.

A Morgan Stanley analyst also reiterated an Underweight rating and cut the price target to $18 per share.

“Consensus has consistently over-estimated JWN EPS and made the stock difficult to own. In order for JWN’s stock to bottom, consensus will likely need to move down to a level the market views as achievable, which we think sits nearer our view. In the meantime, we stay Underweight,” she added.