Standard & Poor’s lowered its recommendations on two retail stocks, Nordstrom and Saks Inc., citing employment concerns and weak economic data for the U.S.
S&P lowered its recommendation of Nordstrom shares to buy from strong buy, and said, “We think JWN should trade at a discount to its 10-year average or at a blended average of closest peers. We continue to believe JWN’s core higher income customer base will remain more resilient in an uneven economic backdrop and think its variable cost structure and disciplined inventory management provide some margin protection.”
S&P maintained its fiscal 2012 and 2013 earnings per share estimates of $3.20 and $3.55, respectively, but cut its target price to $49 from $57 on revised multiple analysis.
The ratings agency said it continues to like Saks’ focus on high income, luxury shoppers and sees the Fifth Avenue flagship benefiting from strong tourist spending, but added, “We are concerned about poor U.S. employment trends and recent weak economic data in the U.S. and worldwide. While we expect luxury shoppers to remain more resilient, we do not believe this segment is immune to broader macroeconomic weakness. We think the shares could be supported by investor Carlos Slim, who recently increased his ownership to about 16 percent of shares outstanding. We trim our target price by $1 to $10 based on peer multiple analysis.”
On the New York Stock Exchange Friday, Nordstrom stock fell 3.24 percent or $1.45 to $43.26. Saks Inc. declined 2.32 percent or 22 cents to $9.28.