Nordstrom Continues to Give Up Hard Won Territory

Most stocks across the market are down in recent weeks as the coronavirus has fuelled fears about the health of the global economy. While the likes of travel names such as Royal Caribbean (NYSE: RCL) and American Airlines (NASDAQ: AAL) are understandably under more pressure than department stores like Nordstrom (NYSE: JWN), that doesn’t mean that Nordstrom investors are sleeping easy these days. And after the company’s release of their Q4 earnings following Tuesday’s session, it might be a few nights yet before they feel well-rested.

The top line and bottom-line numbers missed analyst’s expectations, including both GAAP and non-GAAP EPS numbers, while revenue was barely able to register a full percent of growth compared to this time last year. More weakness was seen across the report as net income fell 22% from the same quarter last year. A miss like this is felt all the more when a stock has been performing poorly and Nordstrom’s shares haven’t exactly been covering themselves in glory so far this year.

Giving Up Gains

After hitting decade lows last August, their shares had staged a remarkable rally through the end of 2019 and were up over 70% off the lows going into 2020. However, they’ve softened considerably since then and were down more than 20% going into Tuesday’s release. Most of this retreat could be attributed to wider fears concerning the virus as most of the damage happened in the past two weeks while the S&P 500 was busy losing close to 15% in its biggest fall since the 2008 crash. That being said, a strong earnings report was needed to prove that Nordstrom had the internals right at least but unlike TJX (NYSE: TJX), who knocked theirs out of the park last week, Nordstrom’s numbers added to their woes and their shares were down more than 10% in after-hours trading.

Fashion and department store stocks have been very hot and cold of late and Wall Street has been kept guessing. Kohl’s (NYSE: KSS) were out with their Q4 earnings on Tuesday morning and despite topping estimates, their stock still fell more than 2.5% during the session. On the other side of the fence, TJX released red hot Q4 numbers last week and at one point during the following sessions had essentially undone all the coronavirus related damage from previous weeks. At the start of February, Ralph Lauren (NYSE: RL) were trading up over 11% after their most recent release.

Fighting to Stay Relevant

Like most of their peers, Nordstrom has struggled to remain relevant with a new generation of online shoppers and have had trouble successfully developing their e-commerce market and brand. They’ve opened non-clothing stores in cities like Los Angeles and New York where shoppers can’t view inventory but can get alterations taken care of or pick up online orders at. They’ve tried partnering with in-trend fashion names like All-Birds to attract millennials and have launched a second-hand clothing section in their flagship store. It remains to be seen if their recent initiatives can hit home with consumers.

For now, though investors should be wary of Nordstrom giving back all its gains from the second half of 2019 if concerns about the market’s ability to withstand the coronavirus’ damage to the global economy continue to grow. There’s a full 25% move needed to bring them down to last August’s decade-low which seems hefty enough but in the context of the moves that some stocks have been making in the past fortnight, doesn’t seem completely implausible if the S&P’s slide continues. Buyer beware.