Nordstrom, Inc.
Thesis
We are long Nordstrom with a price target of $94, representing 46% upside on 11/12/2018’s price of $64.30. Despite common perception, Nordstrom is not only a traditional department store, but it also generates over 50% of its revenue from e-commerce and Nordstrom Rack. Continued outperformance in these favorable pockets of the retail industry will support growth in cash flows and a valuation re-rating.
Did it work?
The long thesis called for a re-rating to $94 (46% upside from $64.30), but instead the stock declined 93.1% over the ~93 months since the pitch. Rather than cash flow growth and a valuation re-rating driven by e-commerce and Nordstrom Rack outperformance, the equity suffered near-total value destruction, decisively invalidating the thesis. With nearly eight years elapsed and a catastrophic negative return, there is no ambiguity about the outcome.