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The Ratings Game: For Nordstrom, Allbirds is in and the Trunk Club styling service is out

At Nordstrom Inc. Allbirds Inc. is in, but the company’s styling service Trunk Club is out.

Nordstrom
JWN,
-2.69%

will start selling Allbirds Inc.
BIRD,
+2.38%

merchandise in select stores starting Wednesday, with items heading to the Nordstrom e-commerce site later this summer. Nordstrom will be one of the few places Allbirds items are available outside of the sustainable shoe company’s own sales channels.

And last Friday, Nordstrom expanded its partnership with Asos, opening a new store at The Grove in Los Angeles. It is Asos’ first co-branded retail shop. For Nordstrom, it’s another way to reach young shoppers.

Read: Allbirds’ international business takes a hit from war in Ukraine, COVID in China

Last week, Nordstrom reported first-quarter revenue that topped expectations, and raised its full-year guidance.

Executives used the earnings call to celebrate, alongside customers, a return to activities away from home.

“This quarter, we saw customers shopping for long-anticipated in-person occasions such as social events, travel and return to office,” said Chief Executive Erik Nordstrom on the earnings call, according to FactSet.

“Beyond occasions, customers also reevaluated and refreshed their wardrobes. We are encouraged by this opportunity because it favors the core categories of our business and the core capabilities of our service model.”

While customers appreciate the personalized touch of a styling service, Nordstrom’s Trunk Club is winding down in order to shift focus.

“We have a range of styling services from low-touch outfit inspiration through our digital channels to a high-touch and personalized relationship with stylists, all of which achieve high customer satisfaction,” Nordstrom said.

“We are directing our investment towards these programs to ensure we are well-positioned to service customer needs and drive growth.”

Also: Swiss running shoe company On Holding runs with premium pricing despite inflation

Nordstrom reported an adjusted loss per share that was, in part, impacted by an impairment charge for Trunk Club.

Cowen analysts say Nordstrom is in the “positive early innings of a business transformation.”

Cowen rated Nordstrom stock market perform with a $24 price target.

And Credit Suisse analysts noted that the company’s upcoming Anniversary Sale will highlight the company’s advantages across demographics and product categories.

“The biggest concern we have isn’t near-term sales trends, but EBIT dollar growth skewed significantly to 2H leaves a lot of risk to the year in our view (if for no other reason that our view that planning a retail business beyond a few months is very hard right now,” wrote analysts led by Michael Binetti.

Credit Suisse rated Nordstrom stock neutral with a $26 price target.

Other analysts were still downbeat about the company’s prospects.

“We think the Street underestimates pressure on Nordstrom earnings from share loss as consumers’ move to online pureplay channels, retailers with better value-for-money propositions such as TJX, and brands’ own stores and websites,” wrote UBS in a note.

“We think many underestimate how difficult it will be for Nordstrom to re-leverage fixed costs.”

UBS rated Nordstrom stock sell with a $12 price target.

“We don’t view the current sales momentum as sustainable. We think the current inflationary environment will impact all consumers, even those with higher income levels and the benefits of pent up demand benefitting dressier apparel categories will ease,” UBS said.

See: Ralph Lauren results beat expectations, dividend raised

And: TJX profit beats expectations, but revenue falls short

CFRA expressed concerns about Nordstrom’s high inventory levels, which it said are above prepandemic levels.

“We also believe Nordstrom will have trouble achieving its guidance as the consumer weakens and promotional activity returns,” wrote Zachary Warring, CFRA equity analyst.

“We see Nordstrom as the worst performing department store and would steer clear of shares, especially with the weakening economic backdrop.”

Nordstrom stock has run up nearly 14% for the year to date while the S&P 500 index
SPX,
-0.33%

is down 13.6%.

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