Nordstrom: Cheap But I'm Not Buying

Summary

• Nordstrom shares have declined 29% over the past year as the company has suffered from a promotional retail environment and rising costs.
• Roughly 1/3 of Nordstrom's revenue comes from its off-price Nordstrom Rack business which has the potential to increase its store base by 50%.
• At $16.70, Nordstrom trades for just 7.3x 2022e EPS, 4.4x trailing EV/EBITDA and a 4.5% dividend yield.
• The Nordstrom family owns ~30% of the company and is managed by Erik and Peter Nordstrom. I view this negatively given their entrenchment and the company's underwhelming performance.
• Despite an attractive valuation, my concerns about the low likelihood of operational improvement and value realization under the current ownership/management structure keep me on the sidelines.

NoDerog

Nordstrom (NYSE:JWN) shares have been a perennial laggard over the past decade. The company has suffered from declining mall traffic, expensive efforts to modernize its store base and build an e-commerce business, and more recently weak retail environment.

That

Analyst’s Disclosure: I/we have a beneficial long position in the shares of KSS either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.