What's happening
Shares of upscale retailer Nordstrom (JWN 0.85%) were down sharply on Monday morning as a steep drop in oil prices and growing concerns about a virus pandemic drove a broad-based market sell-off.
As of 11 a.m. EDT, Nordstrom's shares were down about 8% from Friday's closing price.
So what
Investors on Monday were scrambling to grasp the potential implications of the novel coronavirus, COVID-19, which appears to be spreading rapidly in the United States.
Image source: Nordstrom.
For Nordstrom, those implications aren't too hard to see. First, anything that keeps consumers away from crowded public spaces is bad for a brick-and-mortar retailer. Second, virus outbreaks in Asia and Italy are already playing havoc with fashion's supply lines: Even if Nordstrom's stores have plenty of foot traffic, the chain might still struggle to keep key items in stock.
And, of course, if the virus and other market shocks -- like the collapse in oil prices -- push the U.S. economy into recession, that will hurt Nordstrom's foot traffic, sales, and margins for at least a few quarters.
Now what
Nordstrom's full-year guidance, issued last week, indicated that investors should expect a sluggish rate of sales growth, between 1.5% and 2.5%, for the fiscal year that will end on Jan. 31, 2021. The company hopes to be able to boost margins -- but that effort will depend on a stable economy, which is by no means a certainty.
