Citi Cuts Nordstrom to Sell: Limited Upside, Major Downside Risk Amid Deal Uncertainty

Citi downgraded Nordstrom (NYSE:JWN) from Neutral to Sell, citing an unfavorable risk/reward balance as shares hover near a potential buyout price but face sharp downside if the deal unravels. The firm also trimmed its price target to $22, down from $25.

The downgrade stems from concerns around investor complacency amid a pending acquisition bid by the Nordstrom family and Liverpool, priced at $24.25 per share. Shares recently traded just below that level at $23.96, suggesting the market is largely pricing in the deal's completion. However, Citi warns that the transaction is not guaranteed, and no higher bid is expected—especially in light of broader retail headwinds and increased tariff risks.

Citi notes that while many department store and specialty retail stocks saw steep selloffs—Kohl’s dropped 22%, Macy’s fell 14%—following the Liberation Day tariff announcement, Nordstrom only dipped 2%, likely cushioned by the buyout speculation.

But if the proposed deal fails to close, Citi sees up to 30% downside, making the current setup heavily skewed against investors. With just 1% upside if the acquisition goes through at the stated price, the firm believes the risk outweighs the potential reward, justifying its bearish stance.