Nordstrom’s stock is cheap compared to other retailers

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Nordstrom is a good move for investors looking for a high-end, low-cost retailer.

Gabby Jones / Bloomberg


Nordstrom

the stock has fallen by around 37% in the past 12 months, making it a cheap bet for investors. Another reason the stocks are worth checking out is Nordstrom’s exceptional customer service, says John San Marco, senior research analyst at Neuberger Berman.

The stock (ticker: JWN) fell after third-quarter earnings missed analysts’ expectations, and the company’s Nordstrom Rack activity showed price weakness. On the other hand,


Macy’s

(M) has gained 103% over the past year in part by slashing its stores by nearly 100 and increasing demand online during the pandemic.

Among the bright spots that could boost Nordstrom’s shares, San Marco cited the company’s start in e-commerce, an operation that is managed efficiently. Nordstrom also facilitates transactions for customers to return online purchases to its physical stores. Nordstrom’s customer base is also loyal thanks to its “remarkable levels of in-store service,” he says.

The company makes 40% of its sales online and has approximately 100 full-service stores, while using small neighborhood stores in urban areas for online pickups, returns and changes.

The Seattle, Wash.-Based fashion retailer started as a family-run shoe store in 1901 and now has 306 stores as of October 2021, according to FactSet. It has a market cap of around $ 3.6 billion on Tuesday.

“Brands want to be included and discovered at Nordstrom because they have such a good relationship with customers,” says San Marco.

The stock is up 2.8% year-to-date and is one of the Barron 10 favorite stocks for 2022.

A trend that Nordstrom, like other retailers, must face: Some brands are increasing sales directly to consumers through their own physical stores and websites in order to generate income directly, San Marco said, adding that this allows them to better control their marketing and advertising. The biggest ramification for retailers is the loss of revenue and potentially the customer relationship, he says. Retailers may have to offer incentives or negotiate margins for coveted brands.

For the future of Nordstrom, “I’d like to see more progress, manage expenses, to start,” says San Marco. “We had reason to believe in the long-term margin goals they set for themselves. “

In December, Bloomberg News reported that Nordstrom was working with AlixPartners to review options, including a possible split, for Nordstrom Rack, its non-price business. Such a move could hurt Nordstrom’s “seamless experience” for customers in terms of service, San Marco said.

Nordstrom is cheap based on its enterprise value (market value plus net debt), which puts it at a discount relative to its peers like


Dillard

(DDS), according to FactSet.

Write to Logan Moore at [email protected]

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