Hey Traders,
There is no doubt that Amazon has changed retail forever…
But malls still exist, long after many said they would die….
High end retailers like Niemans, Nordstroms, and Macy’s continue to occupy large areas of land in malls and in cities to sell their expensive merchandise.
But when we look at the stocks of some of these names, it’s a bit scary. Niemans is fresh out of chapter 11, and Macy’s has had about 15 reorganizations in the last 20 years.
Take a look at the stock price for JWN:
The stock sits near a 52 week low.
So is this a chance to get in? Or is the stock going nowhere?
Let’s dive in.
The Good
The best thing going for JWN is human nature.
When people are making splash purchases – splurging on something big – they typically don’t want to wait for it.
In addition, when it comes to expensive clothing like dresses and gowns, they need to be tried on….
The Nordstrom experience is real, and many buyers like it.
JWN sells a ton of apparel online, and the anniversary sale both in store and online is known to cause fights.
Now, Nordstrom Rack has a ton of volume and competes directly with TJX Companies (Ticker: TJX).
The company makes money, pays a nice dividend, and has a PE of 11 … which seems attractive.
But TJX stock has vastly outperformed JWN and has a market cap about 30 times greater.
Why?
The Bad
JWN has loads of loyal customers … but where is the growth?
On the high end, individual retail stores from Chanel and Gucci shave off sales.
On the lower end, you’ve got Macy’s and Nieman Marcus, which is seen as “bougier”.
So where is JWN’s niche?
What is the audience for high end but not super high end?
And how long will that audience continue to NOT use Amazon for some of those purchases…
They are also getting carved out by online only retailers like Revolve (Ticker: RVLV).
Many of you know my wife runs a fashion site BigBlondeHair.com; I can confirm RVLV is carving sales from JWN.
This is a retailer that needs to find a real space if it is going to survive. It could go higher or lower, but where it sits isn’t going to work.
The Verdict
I think they need a reorganization, and outside of the company going private … the stock is probably going to go to 12 dollars a share.
Despite being at a near 52 week low, I see downside.
Questions about that? Leave a comment below!
Your Only Option,
Mark Sebastian