26 August 2020 by jbchevrel
Nordstrom, Inc. (JWN) is a fashion specialty retailer in the US, focused on private labeled apparel, shoes, cosmetics and accessories, both via physical shops and via websites. JWN is the 4th widest CDS in CDX IG s34, after Macy’s and the two cruise companies. COVID hurt JWN clothes sales with trends of work-from-home and less-dressy-events materialized. Today, JWN CDS is the worst performing single-name in the index. The 5y contract is wider by +30bp. Closed at 570bp on our European close. Pre-COVID (2/21 close), that CDS was quoted at 115bp. the widest close on 4/8 recorded 670bp. It then retraced to 350bp on 6/5. At the current 570bp, JWN 5y CDS has retraced 18% of the pre-COVID to post-COVID wide delta. JWN net revenue declined by -53% oya in Q2 (the quarter ended Aug 1), worse than the already chunky -39% oya drop that the consensus had estimated, and the -40% oya drop occurred in the previous quarter. This was not just a physical vs online thing. If online sales outperformed notably the physical ones, the former also fell. By -5% oya. JWN disappointing sales are partially explained by the fact of the anniversary sale, which was pushed back from July to Aug., thus deferring some revenue, especially online, to Q3. Another drag on sales was inventory, which JWN kept lean in order to prevent markdowns and to start the sale with a new merchandise. That allegedly left some demand unmatched. The fall in sales marks a clear under-performance for JWN compared to its peer Kohl’s (KSS) last quarter. Indeed, the latter recorded a drop in sales of ‘only’ -23% oya. It’s all relative… Today, we close KSS 5y CDS unchanged at 323bp. So, comparatively, KSS CDS has retraced 61% (vs 18% for JWN) of the pre-COVID to post-COVID wide delta.