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Fundamental Analysis: NORDSTROM (#JWN)

Evercore #JWN singles out the troubled retailer that could potentially become the "fashion Amazon".

⚡️Some rebound in Nordstrom's share value last week was quickly leveled off after a conference call to discuss the company's long-term strategy at an online investor event that also presented its FY2021 forecast.

⚡️ The news disappointed investors hoping for a resurgence of robust apparel demand after hearing analyst pessimistic comments about the company's concerns during the COVID-19 pandemic. Nordstrom's initial forecast assumes that sales in 2021 will remain 14% below the 2019 level.

However, Evercore ISI acknowledges the investment in Nordstrom technology, which will give the company a unique opportunity to provide customers with access to the entire range of products in stock.

⬆️ Growth factors:

👉🏻 Evercore analysts believe Nordstrom's long history of strong customer relationships and merchandising expertise, combined with the power of the local market ecosystem, is developing into a significant competitive advantage in the complex and ever-changing world of fashion.

👉🏻 Buyers can access all brands, styles, colors, sizes through the app or website. Moreover, the assortment is 7 times higher than the selection in the local store. Also, buyers have the opportunity to order home delivery or pick up purchases in nearby stores within 1-2 days.

👉🏻 Most of all, Evercore was intrigued by the fact that Nordstrom will expand its product range from ~ 300,000 items to ~ 1.5 million over the next 3-5 years by using a partnership model instead of traditional wholesale. This move could bring the company closer to Amazon's level. Nordstrom is also expanding its strategy to the local market, expanding it to the 20 largest US markets from the current 10, thus covering 75% of total sales.

👉🏻 According to analysts, gross margins per unit of product will be lower than with the traditional wholesale model. However, the shift from asset ownership to lease and the company's focus on increasing EBIT are highly regarded in the sector. It is also worth noting that at the moment Nordstrom has reached 50% of the digitalization level.

✅ Nordstrom #JWN

🎯 Target price $ 45, upside potential + 29%.

On a longer time frame, the current share price ($ 37.04) is 50.2% below fair value ($ 74.41)

💎 The company maintains its prospects due to the increase in the share of e-commerce, as well as against the backdrop of investments in technology and the planned expansion of the range. However, given the uncertainty over the recovery in sales this year, we are of the opinion that the investment is more suited to a long-term investment.

OTB Global Investments

London, 24 February 2021

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