Is a positive quarter a sign of results to come for Nordstrom?

Photo: Getty Images
Aug 11, 2017
George Anderson

Shares of Nordstrom’s stock were up in after-hours trading following the department store operator’s report of better-than-expected sales numbers for the second quarter.

Nordstrom’s net sales rose 3.5 percent year-over-year as the company’s Nordstrom Rack and online businesses posted gains. Same-store sales, also driven by Rack and online, were up 1.7 percent for the company. Comps at Nordstrom’s full-line stores have fallen for eight straight quarters.

Nordstrom’s annual anniversary sale boosted numbers for the company’s full-line stores, which still saw a net sales decrease during the quarter. Blake Nordstrom, co-president for Nordstrom, said the sale generates volume that “rivals” what the company does during the Christmas holidays.

This year’s event, Mr. Nordstrom told analysts on yesterday’s earnings call, “outperformed our recent sales trends as customers responded favorably to newness and the ability to shop the way they prefer, in stores, with a mobile device and online.” The company’s buy online, pick up in store business grew by roughly 50 percent during the Anniversary event.

Nordstrom’s online business continues to be a bright spot for the retailer with sales up 20 percent at in the second quarter and up 27 percent at and HauteLook.

Mr. Nordstrom sees creating seamless shopping experiences as key to Nordstrom’s success.

“We view our business through our Nordstrom and Nordstrom Rack brands rather than through discrete store and online channels,” he said (via Seeking Alpha). “The combination of our physical and digital assets represents a competitive advantage. … Nearly 80 percent of customers who shop with us across multiple channels began in our stores.”

Nordstrom continues to integrate “digital and store functionalities to improve speed and convenience for the customer,” said Mr. Nordstrom. He offered an example in which customers can use Nordstrom’s mobile app to “scan an item in store and buy it online if they want a different color or size.”

Nordstrom’s better-than-expected results follow a recent regulatory filing that indicated the company was exploring taking itself private. Family members, who collectively own about 31 percent of Nordstrom shares, have reportedly reached out to third party investors to gauge the viability of such a move.

DISCUSSION QUESTIONS: Do you see Nordstrom’s second quarter results as a sign of better things to come for the retailer? How do you see Nordstrom’s business changing over the next five years?

"Nordstrom does a lot right. Its management tends to stay the course, rather than bounce around."
"While some retailers are not embracing or capitalizing on these trends, Nordstrom is evolving its business to adapt to new customer expectations."
"...what we are seeing from retail as a whole is that it has identified there is a challenge that can’t be ignored..."

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12 Comments on "Is a positive quarter a sign of results to come for Nordstrom?"

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Mark Ryski

One quarter or one event is hardly a trend, but Nordstrom’s management still gets full marks for delivering solid results. This family business has been successfully operating since 1901, and despite twists and turns in the industry and structurally as a private-public company, they have continued to find a successful path forward. Impressively, Nordstrom’s management has been able to find the right balance of selecting and deploying technologies to maintain relevance to their loyal shoppers, but have never lost sight of who they are as a retailer and a brand. I am long-term bullish on Nordstrom.

Paula Rosenblum

I kind of wish we could have seen the combined sales of and Nordstrom full-line stores. Did the huge increase in online sales offset the reduction in sales in stores?

Nordstrom does a lot right. Its management tends to stay the course, rather than bounce around. I think the company over-expanded its full-line stores, but as long as they stop expanding now, the company will right itself and move forward.

Neil Saunders

As department stores go, Nordstrom is one of the winners. It is well-run and has taken some very sound strategic decisions which are now paying dividends. Investing early in omnichannel is one of them, the development of the Rack business is another, the development of proprietary private labels is a third. These things have helped it to differentiate and have placed it in growth segments of the market.

Does it face future pressures? Sure! Is it in a better position to deal with them than most? Certainly! The key to success, however, is a continuation of long-term thinking and investment. This is often at odds with Wall Street’s short-termism, which is perhaps one of the reasons why the family considered taking the business fully private.

Roy White
This report is certainly good news for Nordstrom and marks a break in the trend. In particular the development of online is a huge positive. The chain achieved a 21 percent increase in online (including both of full-line and off-line sites) and, moreover, online has now expanded to 27 percent of corporate volume. Nordstrom appears to be well on its way to changing how it goes to market in a more futuristic way. Also important is the success of the annual sale. However there are some caveats. First, Nordstrom is still in the full-line department store business and half of corporate sales in the quarter flow from the full-line units. This is not an easy channel to work in and does not have the future that, say, online selling might have. For example, I would point out that sales for the full-line units declined 4.4 percent year-over-year for the quarter. Also, corporate earnings were down slightly for the quarter, gross margins narrowed and SGA was quite higher as a percentage of sales. These are trends… Read more »
Dick Seesel

The results of Nordstrom’s Anniversary Sale (and the “less bad” sales reports from Macy’s and Kohl’s) may point toward a stronger second half than expected. It’s too early to tell if we’re seeing a full-fledged revival of women’s apparel sales (still reported as a weak spot on Kohl’s earnings call), but the Nordstrom numbers are encouraging.

I shopped the Anniversary Sale in a couple of markets, and you’d be hard pressed to find a robust sale offering in men’s or women’s — so there must have been some traffic-driven regular-price selling in the mix. Hats off to Nordstrom for sticking to its promotional discipline and for continuing to ride the success of its Rack and e-commerce businesses.

Larry Negrich

An individual retailer’s quarterly results won’t signal a retail industry turnaround, but what we are seeing from retail as a whole is that it has identified there is a challenge that can’t be ignored and many retailers are reevaluating their businesses practices and making major changes to the model. In Nordstrom’s case, it is a good sign that a company in the most difficult segment of retail, department stores, has been able to improve some of the financial metrics in a short timeframe.

Ricardo Belmar

While one quarter of success doesn’t signify a full trend, it is a good sign. I can see drawing analogies between their anniversary sale and Amazon’s Prime Day to understand the impact to the brand and their business. Online and Nordstrom Rack stores are a bright spot, but I’d still like more analysis on the impact opening a Rack store has when it’s in the same market as a full-line store. Nordstrom does have the right mindset when it comes to integrating online and physical into a seamless experience and they seem better at execution than other department store brands, so I’d say they have a positive future ahead of them!

Jett McCandless

It’s at least mildly encouraging, but it’s only one quarter. Still, many retailers experiencing a downturn over the last few years have not had a positive quarter like this. At the very least, it’s something to keep an eye on. I’d like to see more data on where these sales are coming from because I would bet that e-commerce strategy has a lot to do with it.

Companies that are able to make a successful transition from brick-and-mortar to retail are in the best positions for success.

Shep Hyken

One quarter’s results is hardly a trend. Hopefully it’s the beginning of a trend. But I can tell you why Nordstrom is performing well. They have good merchandise. They have good service. And they understand their customers. They know why they buy and how they like to buy. They cater to the customer as skillfully as, if not better than, any other top retailer. They understand the in-store experience and have done well to understand the mobile and online experiences, which are constantly changing. Look how they have moved into the digital world and expect more of that over the next few years. Any other retailer would be smart to look to Nordstrom as a role model to learn from.

Ken Morris

Nordstrom’s sales trends are similar to the trends we are seeing in the retail industry. A continued shift of sales from in-store to online and very strong sales results for off-price retailers.

While some retailers are not embracing or capitalizing on these trends, Nordstrom is evolving its business to adapt to new customer expectations. It’s great to see that Nordstrom understands the need to blend the digital and physical worlds and appreciates the role the store plays in consumers’ buying journey.

The trends we have experienced in the past couple years are expected to continue. One of the greatest challenges for Nordstrom will come from online marketplace giants like Amazon that sell a lot of the same products. Nordstrom’s private label products are high quality at a reasonable price point. I believe it is imperative to build the private label business to help avoid the inevitable disintermediation from the online, pure-play disruptors. The key for Nordstrom will be to differentiate their brand based on what they always have — great personalized services!

Craig Sundstrom

I’m confused by the thinking in both the poll and the article: it makes sense to break down Nordstrom’s business into two parts — “full line” and Rack — as those are the two merchandising segments … and indeed their comments seem to reflect this. But to break it down into three (Full-line/Rack/Online)? If most of the online sales are coming from full-line and perhaps a small amount from Rack, why say that the former is rising while the latter is falling? The whole point of omnichannel is to emphasize aggregates and avoid this type of thinking.

That having been said: +3.5% … a positive sounds … well … positive.

Paul Donovan

After looking at the breakdowns, it seems that full line physical, while down (4.4%) was not down as much as last year at (6.5%) and full line .com up 19.8% from 9.4% in prior year.

Rack physical went down to negative comparable to (1.0%) from positive 1.1% last year. Rack .com growth slowed to 26.7% from 34.7% last year.

One could make the point that physical comps are still under pressure due to lack of cross channel growth. Clearly online is in good shape as a standalone, but not the cross channel engagement as the physical comps are still under pressure.

Nordstrom has enviable online results in a lot of respects doing 43% of total sales in full line and 20% of sales in rack business which are good figures for ratio comparisons. If they convert a healthy % of the online shopper to visit physical, over time it should help greatly their long-term prospects.

"Nordstrom does a lot right. Its management tends to stay the course, rather than bounce around."
"While some retailers are not embracing or capitalizing on these trends, Nordstrom is evolving its business to adapt to new customer expectations."
"...what we are seeing from retail as a whole is that it has identified there is a challenge that can’t be ignored..."

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