The Next 5 Retailers on the Edge of Bankruptcy - 1 of 5

#1 - Nordstrom (NYSE:JWN)

Relying on additional stimulus is not a plan. But that’s the reason why some analysts felt Nordstrom (NYSE:JWN)stock was on the rise after delivering a stinker of an earnings report. On May 28, Nordstrom reported earnings per share of ($2.23). This was far below analysts’ estimates of ($1.07).

Nordstrom also delivered $2.03 billion in revenue, short of analysts’ estimates for $2.27 billion. That was down 39.5% on a year-over-year basis. And net sales fell 40% during the quarter. The losses were across the board. Full-price department stores posted a decline of 36% while sales at the company’s Nordstrom Rack division were down 45%.

One bright spot was an increase in e-commerce sales, which increased by 5%, to reach $1.1 billion. And the company is opening stores. Nordstrom says approximately 40% of its stores are now back open for business. The company intends to be fully open by the end of June, including opening the company’s flagship store in New York City.

But with social distancing guidelines in place, it’s hard to tell how much that will help sales. A more difficult question to ask is if consumers will have the confidence to spend on luxury merchandise. That’s where some analysts think the off-price Nordstrom Rack and Trunk Club businesses will be a lifeline for the company.

Nordstrom is confident that having $1.4 billion in cash on hand at the end of the first quarter will be repurchases, there’s not much reward to go along with the risk of owning the company’s stock. That could keep value investors away.

And growth investors have to be a little concerned over the $1.4 billion that the company added in secured debt ($600 million) and by drawing down on its revolver ($800 million).

About Nordstrom

Current Price

$23.24

Consensus Rating

Reduce

Ratings Breakdown

0 Buy Ratings, 10 Hold Ratings, 3 Sell Ratings.

Consensus Price Target

$20.58 (11.4% Downside)