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Evercore Downgrades Nordstrom to Hold Amid Rising Inventory and Margin Pressures

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  Published in Stocks and Investing on Monday, December 15th 2025 at 12:29 GMT by CNBC

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Evercore’s Latest Moves: Downgrading a Flagship Retailer While Betting on Two Growth‑Focused Names

In a crisp editorial that was published on CNBC’s finance desk last week, Evercore—a boutique investment‑banking and research house known for its high‑profile equity recommendations—issued a dual‑pronged commentary on the U.S. retail landscape. The firm announced a downgrade of a well‑‑known brick‑and‑mortar retailer and, at the same time, initiated buy recommendations on two other companies that the analysts believe are poised to benefit from the ongoing shift toward e‑commerce and value‑focused retailing.

Below is a detailed summary of Evercore’s key points, the broader context that shaped those decisions, and a look at the immediate market reaction to the news.

1. Downgrading a “Retail Mainstay”: Nordstrom Inc. (NDSN)

Evercore’s research note (linked on CNBC’s story) re‑rated Nordstrom from “Buy” to “Hold.” The downgrade is anchored on three main concerns:

Why the downgrade matters

1. Inventory Challenges: Nordstrom’s Q4 earnings release (a link to the company’s SEC filing is included in the CNBC article) highlighted a $1.2 billion increase in inventory, reflecting a strategy to stock up for holiday sales that has not yet paid off. Evercore notes that inventory-to-sales ratio is at 14.8 %—the highest in the last decade—which can erode margins if sales fail to absorb that stock.

2. Margin Compression: The firm cites a widening gap between Nordstrom’s selling price and its cost of goods sold, largely due to higher procurement costs and an increased focus on premium brands. The margin squeeze is not being offset by the expected price‑elasticity of the retailer’s luxury and high‑end fashion lines.

3. Competitive Landscape: Evercore underscores the continued pressure from direct‑to‑consumer brands, such as Warby Parker and Everlane, and the “shoppable‑style” e‑commerce platform Shopify (linked in the article). These competitors offer lower operating costs and an omnichannel experience that Nordstrom’s legacy systems are struggling to match.

Market Reaction

• Nordstrom’s stock price fell by ~4.3 % within the first few hours of the CNBC story’s publication, reflecting the downgrade’s negative sentiment.
• The “Hold” rating implies that Evercore sees Nordstrom as a buy‑and‑hold vehicle for a longer‑term horizon but no longer recommends aggressive accumulation or short‑term trading.

2. Initiating Buy Recommendations: Etsy Inc. (ETSY) & Dollar General Corp. (DG)

While the downgrade of Nordstrom was the headline, Evercore also identified two other companies as attractive opportunities. Both are in fundamentally different segments—one in the niche e‑commerce space and the other in discount retail—yet share common strengths in brand loyalty, inventory efficiency, and growth trajectory.

Etsy Inc. (ETSY)

• Target Price: $135 from the current $110 level (a 23 % upside).
• Rationale:
  • Unique Market Position: Etsy’s marketplace for handmade and vintage items retains a high‑value, highly‑segmented customer base that is less price‑sensitive.
  • Revenue Growth: Q4 earnings showed a 9.8 % YoY revenue increase driven by higher seller fees and international expansion.
  • Gross Margin: 68 % in 2024—significantly higher than industry peers—reflecting lower logistics costs due to the marketplace model.
  • User Base Growth: 12 million active buyers in Q4, up from 10 million in 2023.

Evercore highlighted the “social commerce” trend, where community and authenticity become buying drivers, and concluded that Etsy is positioned to ride that wave.

Dollar General Corp. (DG)

• Target Price: $50 from the current $44 level (a 13 % upside).
• Rationale:
  • Consistent Demand: Dollar General’s focus on value and convenience has proven resilient even during inflationary periods.
  • Store Expansion: 2024 saw the opening of 400 new stores, primarily in rural and underserved markets, increasing reach by 1.2 %.
  • Operating Margin: 6.1 % YoY, up from 5.7 % in 2023, indicating improving operational efficiency.
  • Debt Profile: A low leverage ratio of 0.8×, giving DG the flexibility to invest in inventory and digital capabilities.

The analysts noted that the “value retail” segment is likely to continue its dominance among cost‑conscious consumers, making Dollar General a solid buy in a sector with strong defensive characteristics.

3. Broader Retail Trends Influencing Evercore’s View

The CNBC article, along with the linked research notes, draws a broader picture of the retail sector’s current dynamics:

1. E‑Commerce Dominance: The shift from physical stores to online shopping has accelerated. The average U.S. consumer now spends $1.5 billion annually online, a 5 % increase from 2024.

2. Supply‑Chain Resilience: Retailers with flexible, multi‑channel supply chains are outperforming those still stuck in legacy logistics. Evercore cites Amazon’s logistics arm as a benchmark.

3. Consumer Demographics: Millennials and Gen Z are the primary drivers of online purchases, with a preference for experiential and niche products—an area Etsy excels in.

4. Inflation and Price Sensitivity: While higher prices have strained discretionary spending, discount retailers like Dollar General are benefiting from the shift to lower‑cost alternatives.

4. Implications for Investors

Evercore’s dual recommendations provide a clear message to market participants:

• Hold or Sell Nordstrom if you are in a short‑term trading window, but consider long‑term positioning if you anticipate a retail cycle turn.
• Add Etsy to a portfolio seeking growth through niche e‑commerce, especially if you’re comfortable with a higher valuation premised on premium margins.
• Add Dollar General as a defensive play that balances growth with stable cash flows, especially in a high‑inflation environment.

The immediate market reaction underscores the influence of Evercore’s research. Investors who followed the research note found Nordstrom’s price dip to be in line with the downgrade’s sentiment. Meanwhile, Etsy and Dollar General have both seen modest gains as their buy recommendations began to filter through to the wider market.

5. Where to Find More Information

• Evercore Research Note (PDF): Provided in the CNBC article’s “See also” section; contains detailed financial models, key assumptions, and a 12‑month forecast.
• Nordstrom Q4 Earnings Release: Link to the SEC filing gives granular insight into inventory levels and cash flow.
• Etsy’s Q4 Investor Presentation: Highlights growth drivers and future product roadmap.
• Dollar General’s 2024 Investor Call Transcript: Offers insight into store expansion strategy and margin improvement plans.

Each link, while briefly mentioned, offers deeper insight that corroborates Evercore’s overarching narrative: the retail landscape is in flux, with some brands capitalizing on the shift while others grapple with the transition.

Bottom Line: Evercore’s latest commentary paints a nuanced picture of the U.S. retail sector. While the firm signals caution for Nordstrom—citing inventory pressure, margin erosion, and competitive threats—it simultaneously spotlights opportunities in niche e‑commerce and value‑focused retail. Investors should weigh these signals against their risk appetite, time horizon, and exposure to the broader consumer sector.