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Why Nordstrom (JWN) is No More in Investors' Good Books

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We had learnt in school that “A stitch in time saves nine.” The saying simply means that a timely action can prevent some serious loss later on. How about applying the same principle to your portfolio? Exiting an underperforming stock at the right time helps maximize your portfolio’s returns. Nordstrom Inc. (JWN - Free Report) is one such stock that is no longer in investors’ good books. Let’s find out why.

This fashion specialty retailer of apparel, shoes, cosmetics and accessories has been witnessing a downtrend in the Zacks Consensus Estimate. Moreover, the company currently carries a Zacks Rank #5 (Strong Sell). This implies that analysts covering the stock are not convinced about Nordstrom’s performance in the near future.

So, why are investors steering clear of Nordstrom? Shares of the company have nosedived roughly 49% in the past one-year period, and the stock touched a 52-week low of $36.19 on May 18, 2016. It hit a 52-week high nearly a year ago on Jul 16, 2015.

Nordstrom continued with its dismal run, posting the third straight quarter of negative earnings surprise of 42.2% in the first quarter of fiscal 2016, after an earnings miss of 4.1% and 19.7% in the fourth and third quarters of fiscal 2015, respectively. In the trailing four quarters, the company underperformed the Zacks Consensus Estimate by an average of 15.7%.

Nordstrom’s first-quarter earnings of 26 cents a share came in way below the Zacks Consensus Estimate of 45 cents and slumped 60.6% from the prior-year quarter figure of 66 cents. Following a disappointing performance, the company lowered its outlook for fiscal 2016. Management now envisions fiscal 2016 earnings per share in the range of $2.50–$2.70, down from $3.10–$3.35 expected earlier.

Consequently, the Zacks Consensus Estimate of $2.55 and $2.91 for fiscal 2016 and fiscal 2017 has dropped 63 cents and 60 cents, respectively, over the past 30 days. Moreover, the Zacks Consensus Estimate for the second quarter has decreased 16 cents to 56 cents over the same time frame.

With Nordstrom’s share price tumbling and estimates witnessing downward revisions, it would not be prudent to keep the stock in your portfolio, at least for the time being.

NORDSTROM INC Price, Consensus and EPS Surprise

NORDSTROM INC Price, Consensus and EPS Surprise | NORDSTROM INC Quote

Stocks that Warrant a Look

Investors interested in the retail space may consider some better-ranked stocks such as Delta Apparel Inc. , sporting a Zacks Rank #1 (Strong Buy), and The Children's Place, Inc. (PLCE - Free Report) and Carter's, Inc. (CRI - Free Report) , both holding a Zacks Rank #2 (Buy).

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