Spotlight on a company – Nordstrom
US luxury department store chain Nordstrom plunged 25% on Wednesday 23rd November following poor third-quarter earnings. The company had advanced 2.3% during 2021 up until close on Tuesday 22nd, but due to shortages in women’s shoes and apparel leading to a lack of discounted high-end products, the retailer suffered an 8% hit to sales in the third quarter at rack stores, and a 1% fall in overall revenue. Bosses switched sales focus away from high end products to more moderately priced lower end brands in an attempt to make up for the shortages caused by poor inventory planning, but their earnings report suggests they went too far in the opposite direction, damaging revenue. Nordstrom has struggled compared to competitors in regaining pre-pandemic earnings, with the latest report making it two straight quarters of sub pre-pandemic sales. Chief executive officer Erik Nordstrom said he is “not satisfied at all” and that “Nordstrom’s rack numbers are terrible”. Despite the third-quarter failure and fall in revenue, the retailer remained stern in its expectation that revenue is on track to grow more than 35% for its fiscal year from 2020.
S&P 500
The US index closed at 4,594.62 on Friday, a 2.42% decrease across the week. Friday again saw the crushing effects of uncertainty surrounding the pandemic and the most heavily mutated variant to date, with the S&P 500 airlines index falling 8.8%, alongside a 8.95% fall in the hotels index. United Airlines took a particularly large hit, falling 9.57%, while it was Occidental Petroleum that suffered the most in the oil and gas sector, falling 7.22%. The travel and hospitality sectors have taken the biggest hits, but oil and gas index also fell just under 7% as well. However there were also substantial gainers due to the new variant, Moderna grew 20.57% closing at 329.63, while PFIZER closed at 54.00, a 6.11% increase. Online video call service Zoom also showed strong growth of 5.72%, corresponding with fears of lockdowns and a shift back to remote working and learning. However there were only 33 stocks that finished higher on Friday, representing the S&P 500’s lowest close since February. The question is now is whether the pandemic fears are just a short term speed bump, or the end of the bullish growth we have seen other the past year.
FTSE 100
The blue-chip UK index finished 7,044.03, just above the session low of 7,042.12, and above the opening high of 7,310.37. A 3.6% decrease, representing a fall of £72 billion, mostly due to increased fears of further travel restrictions and lockdowns. Big sell outs in the travel sector saw British airline owner IAG fall 15%, holiday firm TUI down 10% and easyJet 9.9%. Financial brokerage XTB director said last week “the new covid variant has created uncertainty in the markets today, with investor appetite shying away from risk”. With the lack of quick data available on the new variant’s ability to evade the vaccines, it could be a more prolonged period of a sceptic and pessimistic approach from investors, especially towards the travel and hospitality industry.
Nikkei 225
The Nikkei 225 closed 3% down on the previous week, and 2.53% down on Friday to close at 28,751.62. This is also amidst fears of the mutating virus leading to a new more powerful variant, which has been detected in Hong Kong. Oil and travel stocks have both suffered, making Friday’s close a one-month low for the index.
Overall
Overall it has been a poor week for global markets, largely due to the discovery of a new, highly mutated virus in South Africa, that has also been detected in other countries such as Hong Kong since. With travel restrictions growing, and lockdown fears heightening, investors have been more cautious, leading to big sell outs in the travel and hospitality industry. If the variant can be controlled, there should not be much to worry about going into the festive period, but it’s a big if, and only time will tell.