Nordstrom Beginning To Take A Hit From Revenue Woes

Paul Trussell of Deutsche Bank downgraded Nordstrom, Inc. (NYSE: JWN) from Buy to Hold with a price target lowered by $1 to $56.

According to Trussell, Nordstrom's stock rewarded timely investors with a 46 percent return since the end of June while simultaneously outperforming its peers. Despite the analyst's downgrade, the fashion and accessory retailer has stabilized from a margin standpoint after the company's woes which began in the Winter of 2015.

Nordstrom's decision to lower its seasonal holiday hires this year could also dampen the bullish sentiment as it comes at a time when many other retailers are increasing their seasonal hiring activity.

Trussell isn't the first Wall Street analyst to no longer hold a bullish view on the stock. Analysts at Morgan Stanley downgraded Nordstrom to Sell back in early August.

Trussell said Wall Street doesn't fully recognize Nordstrom's upcoming earnings per share improvement ahead by lapping easy margin compares and an improving outlook in Canada, HauteLook/Nordstromrack.com and Trunk Club. However, while this will happen, the company's top-line won't show sufficient growth to maintain the stock's multiple an a downgrade to the sidelines is warranted at this time.

Q3 And Full Year Outlook

Nordstrom is confirmed to report its third quarter results on November 10.

Trussell estimates Nordstrom will report same-store sales growth of just 1.8 percent, which marks a drop from his prior estimate of 3 percent.

The analyst is also estimating the company will earn $0.55 per share in the third quarter and $2.92 per share for the full year. By comparison, the Street is modeling $0.52 per share in the third quarter and $2.73 per share for the full year.

Trussell noted that Nordstrom is lapping four consecutive triple-digit basis points GPM (gross profit margin) declines starting in the third quarter of 2015 which were the result of higher markdowns in a slow sales environment with poor weather conditions and weaker tourist activities.