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Why Nordstrom Stock Plunged Today

By Joe Tenebruso – Nov 24, 2021 at 4:05PM

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The retailer is underperforming its peers.

What happened

Shares of Nordstrom (JWN -8.34%) crashed on Wednesday after the department store company's third-quarter earnings results distressed investors.

As of 3:45 p.m. ET, Nordstrom's stock price was down 29%. 

So what

Nordstrom's net sales rose 18% year over year to $3.5 billion, as more shoppers returned to the retailer's stores. Yet Nordstrom's sales were still slightly below their pre-pandemic levels.

Nordstrom Rack's sales, which were down 8% from the third quarter of 2019, were a particular source of concern. The off-price department store chain is struggling with inventory shortages and other supply chain challenges.

"We're taking action to improve performance at Nordstrom Rack, including optimizing inventory levels, better balancing price points, and increasing brand awareness," CEO Erik Nordstrom said in a press release.

A downwardly sloping stock chart.

Investors bailed out of Nordstrom's stock on Wednesday. Image source: Getty Images.

Moreover, rising labor and fulfillment costs are taking a toll on Nordstrom's profitability. Its selling, general, and administrative expenses as a percentage of revenue rose 2.3 percentage points to 34%.

All told, Nordstrom's net income increased 21% to $64 million, or $0.39 per share. That was well below Wall Street's estimates, which had called for earnings per share of $0.56. 

Now what

The shortfall prompted J.P. Morgan analyst Matthew Boss to cut his share price forecast for Nordstrom's stock from $27 to $23. Despite favorable retail trends and the relative strength of the company's affluent customer base, Boss expects Nordstrom to continue to underperform its rivals. Thus, he reiterated his recommendation that investors should underweight its stock in their portfolios.

Judging by the brutal decline in Nordstrom's stock price today, many investors agreed with Boss and decided to sell their shares.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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