Nordstrom (JWN) Stock: Why The Price Substantially Dropped

By Amit Chowdhry ● Nov 24, 2021
  • The stock price of Nordstrom, Inc. (NYSE: JWN) fell by over 25% pre-market today. This is why it happened.

The stock price of Nordstrom, Inc. (NYSE: JWN) fell by over 25% pre-market today. Investors are responding negatively to the company’s Q3 2021 earnings.

Nordstrom had reported third quarter net earnings of $64 million or $0.39 per diluted share, with earnings before interest and taxes (EBIT) of $127 million. For the third quarter ended October 30, 2021, the net sales increased 18% versus the same period in fiscal 2020 and decreased 1% versus the same period in fiscal 2019. And the timing of this year’s Anniversary Sale, with approximately one week falling into the third quarter of 2021, had a positive impact of approximately 200 basis points on net sales compared with fiscal 2019.

As Nordstrom is continuing to strengthen its financial position, the company remains on track to reduce its leverage ratio to approximately three times, and be in a position to return cash to shareholders, by the end of 2021.

EBIT was $127 million in the third quarter of 2021, compared with $106 million during the same period in fiscal 2020 primarily due to higher sales volume and improved merchandise margins, partially offset by labor cost pressure. And EBIT was $66 million lower than the third quarter of fiscal 2019 due to fulfillment and labor cost pressures, partially offset by continued benefit from resetting the cost structure in 2020.

The third quarter net income of $64 million increased from net income of $53 million during the same period in fiscal 2020 – which included a tax benefit associated with the CARES Act of $19 million. And the company ended the third quarter with $867 million in available liquidity, including $267 million in cash.

FISCAL YEAR 2021 OUTLOOK

The company is reaffirming the following financial expectations for fiscal 2021:

— Revenue, including retail sales and credit card revenues, is expected to grow more than 35 percent versus fiscal 2020

— EBIT margin is expected to be approximately 3.0 to 3.5 percent of sales

— Income tax rate is expected to be approximately 27 percent

— Leverage ratio is expected to be approximately 3x by year-end

KEY QUOTES:

“We have long benefited from a commitment to customer service, new and compelling merchandise, innovative brand partnerships and interconnected digital and physical assets. However, we need to move faster to capitalize on these strengths and profitably grow market share. We’re taking action to improve performance at Nordstrom Rack, including optimizing inventory levels, better balancing price points and increasing brand awareness. Work is also underway to improve merchandise margin across the Company and ensure we have the visibility and flexibility we need to serve our customers seamlessly, despite global supply chain challenges. In the third quarter, we made continued progress toward our strategic and financial goals, driven by strong digital growth, the integrated capabilities enabled by our Market Strategy and increased net sales in our Nordstrom banner stores, but we are focused on accelerating our transformation and improving results.”

— Erik Nordstrom, chief executive officer of Nordstrom, Inc.

“Taking lessons learned from this year’s Anniversary Sale, the team has combined the art of merchandising with data-driven insights to put the right assortment in the right place at the right time. For the holiday season, we are excited about our plans to use our integrated network of stores and digital platforms to showcase holiday dressing, decor and gift offerings, and provide festive experiences and convenient services that make shopping easy and enjoyable for our customers.”

— Pete Nordstrom, president and chief brand officer of Nordstrom, Inc.

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.