UBS skewers Nordstrom as a 'no-growth retailer' that's suffering from a 'cultural shift' in shopper behavior

Rachel Askinasi/Business Insider

UBS called Nordstrom a "no-growth retailer."

• UBS said in a new analysis that Nordstrom is a "no-growth retailer" with "very poor" investor sentiment.
• Nordstrom is suffering from a "cultural shift" of shoppers opting for low prices over quality, UBS said.
• Nordstrom's price perception is also declining and the company will likely suffer from a predicted pullback in spending among wealthy shoppers, the report stated.
• Nordstrom did not immediately respond to a request for comment.
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UBS delivered a blistering analysis of Nordstrom on Tuesday that described the company as a "no-growth retailer" with "very poor" investor sentiment that is increasingly losing ground to discounters.

The analysis said Nordstrom is suffering from several headwinds, including a "cultural shift" of shoppers opting for low prices over quality.

"Consumers have traditionally shopped Nordstrom for business and special occasion attire. Consumers today are migrating to discount retailers for these items," said the report, which was based on data from UBS shopper surveys. "We think this reflects a cultural shift where consumers don't think they need to invest in the type of high-quality merchandise available at Nordstrom for work as much as they used to."

UBS said this trend also reflects the "casualization" of America, in which shoppers are increasingly opting for more casual clothing.

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"This is not something we think Nordstrom can easily recover from," UBS said in the report, as it downgraded the company from "buy" to "neutral" and lowered its price target from $65 to $33. Nordstrom did not immediately respond to a request for comment.

The department store chain is also losing ground to rivals on pricing with both its Nordstrom and Nordstrom Rack banners, according to the UBS data.

"No retailer, among the ones we surveyed, had a bigger year-over-year drop in price perception, other than Gap and JCPenney," the report said.

UBS said Nordstrom will likely need to increase promotions to win back customers.

The report also predicted that Nordstrom will feel pressure in the coming months from a potential pullback in spending among wealthy shoppers.

UBS data "suggests high-income US consumer spending will stay weak through the fall season," the report said.