NEW YORK—BofA has slashed its profit estimates and price targets for Nordstrom and Kohl's, saying credit card data indicates rising financial stress on households amid higher interest rates.
“Those higher rates are driving increased delinquencies and could potentially lead to more charge-offs on department store credit cards soon,” Yahoo Finance reported.
Added BofA analyst Lorraine Hutchinson in a note to clients, "We expect KSS and JWN will see a decline in credit revenue in the coming quarters as rising delinquencies turn into charge-offs.
‘Pure Profit Center’
As Yahoo Finance noted, store credit cards — with interest rates in some cases above 30% — have long been a pure profit center for department stores. “Credit card sales made up about 87% of operating profits at high-end department store Nordstrom in 2022, according to experts. In 2021, that number was 79%,” Yahoo Finance said.
Indeed, credit card sales generated the majority of operating profits at Kohl's in 2022, the report added.
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