Retail stocks have taken investors on a roller-coaster ride over the past few years—and it’s not just because of the pandemic. But there are opportunities in retail even with the volatility.
Nordstrom (ticker: JWN) is one retailer that’s getting it right, according to Barron’s reporter Logan Moore.
Before Covid-19, one of the problems plaguing retailers was that shoppers increasingly favored online shopping instead of bricks-and-mortar stores. That preference became the way of the land in March 2020 when much of the global economy was shut down to slow the spread of Covid-19.
Retailers that weren’t selling household necessities were punished by investors. But retailers that had robust e-commerce sites fared better. While Nordstrom boasts nearly 400 locations, it does well in merging both physical and digital locations and is known for its top-notch customer service both in-store and online. In fact, roughly 40% of the department store chain’s sales come from online orders.
Nordstrom stock is still a bargain. Shares recently traded at 10.8 times forward earnings, well below its five-year average of 17 times, according to FactSet data. Analysts expect the stock could hit $24, up 11% from recent trading levels.
One way Nordstrom can close the gap is by leveraging its online presence even more. The department store is in a good position because top fashion brands still want the cachet of having their lines carried by Nordstrom. That said, brands are increasingly trying to sell directly to consumers. Nordstrom must find ways to attract shoppers to visit its stores—even online—to fend off the competition.
Nordstrom shares are down 4.5% this year, faring better than both the S&P 500 and the SPDR S&P Retail exchange-traded-fund (XRT), which are down about 9% and 14%, respectively. Nordstrom reports earnings for its fiscal fourth quarter on March 1.
You can learn more about why Nordstrom stock is worth a look in the video above. And don’t forget to subscribe to my YouTube channel, where I’ll continue to take a look at Barron’s stock picks.
Write to Carleton English at [email protected]
