By Sam Boughedda
UBS analyst Jay Sole reiterated a Sell rating and a $12 per share price target on retailer Nordstrom (NYSE:JWN) on Monday.
The analyst said they continue to rate the company as a Sell as they believe the Street underestimates pressure on its 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," wrote Sole. "We see downward revisions to sell-side consensus over the NTM pushing JWN toward our $12 PT. Our $2.85 FY22e EPS is 8% below consensus. Our PT is ~43% below current price."
The analyst pointed to UBS Evidence Lab's 5th US Retail Perceptions survey as the reason for their increased confidence in their rating.
"Our main survey takeaway is both Nordstrom and Nordstrom Rack will likely struggle vs. competitors such as TJX, BURL, ROST, and AMZN. We think this will make it difficult for JWN to meet Street EPS expectations and increases our Sell rating conviction," the analyst commented.
According to UBS research, consumers say Nordstrom's full-price store prices are too high and are the number one reason consumers say they don't shop at Nordstrom.
"We believe this is why JWN's full-price stores are losing more customers than they are gaining. Plus, Nordstrom consumers say they expect prices to get worse over the NTM relative to what they normally expect," said Sole, who added that the survey data suggests Nordstrom Rack's value proposition is an issue.
"Nordstrom Rack shoppers say the #2 reason they choose a retailer is 'value-for-money.' However, the same consumers say TJ Maxx, Marshalls, Burlington, Ross Dress for Less and Amazon (NASDAQ:AMZN) all have better value-for-money propositions," he added. "We think this explains why Nordstrom Rack is struggling to maintain its level of loyal customers. Lastly, we note Nordstrom Rack customers are 6x as likely to shop at Amazon as they are Nordstrom Rack when they shop online."