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Nordstrom Shares on Bargain Rack?

We've placed our fair value estimate for the department store under review after a weak third quarter, but we think the sell-off has created an interesting entry point for long-term investors.

We are putting shares of

Third-quarter comp sales grew only 1%, a significant deceleration from six straight quarters of mid-single-digit comp increases. This resulted in 7% overall sales growth. Weakness was across geographies, formats, and products leading us to believe that the subpar traffic levels were a result of an overarching weaker consumer, not company-specific factors. In our opinion, management reacted quickly to this weakness, immediately using markdowns to clear excess merchandise and finished the quarter with inventory growth roughly in line with revenue growth. Although we expect top-line weakness to continue, we think the company will benefit on a market share basis as it will have less discounting and more capacity for newness in its products.

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About the Author

Bridget Weishaar

Senior Equity Analyst

Bridget Weishaar is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She covers apparel retailers.

Before joining Morningstar in 2013, Weishaar spent five years as an equity analyst on the Internet research team at J.P. Morgan. She also worked as a retail analyst for Bear Stearns.

Weishaar holds a bachelor’s degree in science pre-professional studies from the University of Notre Dame and a master’s degree in business administration from The Wharton School of the University of Pennsylvania.

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