Nordstrom ain’t what it used to be before the pandemic

Discussion
Photo: Nordstrom
Sep 07, 2021

Nordstrom experienced a number of stock downgrades and an 18-percent one-day sell-off after reporting that second quarter sales declined versus pre-pandemic 2019 levels and lagged behind many of its department store and off-price peers.

On the positive side, earnings and sales exceeded Wall Street’s estimates and Nordstrom raised its full-year revenue growth guidance from 25 percent to 35 percent.

Compared to the second quarter of 2019, however, Nordstrom’s company-wide sales still decreased six percent with a decline of five percent at the full-line Nordstrom brand and eight percent at Nordstrom Rack. By comparison, comps rose 5.8 percent at Macy’s, 14 percent at Dillard’s and 20 percent at TJX Cos. Net sales on a two-year stack improved 1.3 percent at Kohl’s and 21 percent at Ross Stores.

Full-year operating margins were also guided down 200 basis points versus 2019 which some analysts saw as an indication of challenges Nordstrom has faced raising average selling prices versus competitors.

On an analyst call, Erik Nordstrom, CEO, highlighted that Nordstrom now has four consecutive quarters of sequential improvement in sales trends for both its Nordstrom and Nordstrom Rack banners.

He highlighted progress under its “Closer to You” program that includes a heightened focus on integrating online and both banners in major markets; adding price-oriented offerings in active, home and kids at Rack; and expanding its digital-first approach. Online sales grew 24 percent over the second quarter of 2019 to account for 40 percent of sales.

Supply chain disruption may be impacting Nordstrom more than competitors as Rack particularly faced women’s apparel and footwear shortages. Daniela Nedialkova, at Atlantic Equities, wrote in a note, “Given for a number of quarters now, the recovery pace has lagged peers, we expect more structural questions around vendor relationships may emerge.”

J.P. Morgan’s Matt Boss, who downgraded Nordstrom’s stock to neutral, said the current environment should be “as good as it gets” for Nordstrom as its higher-income consumer should be eager to spend with the economy normalizing and on the pricing and promotion front. Mr. Boss wrote in a note, “Nordstrom’s absolute and relative performance remains underwhelming.”

DISCUSSION QUESTIONS: What do you suspect is causing underperformance at both the Nordstrom full-price chain and Nordstrom Rack? How confident are you that management has strategies in place to regain top-line momentum?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Purchases at Nordstrom may be a bit more of an investment than the current foggy outlook will allow."
"Unfortunately, Nordstrom over the past few years has drifted from “style” to now offering 100s if not 1000s of versions of expensive basic t-shirts."
"Without their legendary sales staff — many of whom were laid off or switched career paths during the pandemic — Nordstrom just can’t justify its ticket prices."

Join the Discussion!

22 Comments on "Nordstrom ain’t what it used to be before the pandemic"


Sort by:   newest | oldest | most voted
Mark Ryski
BrainTrust

Nordstrom is lagging compared to others, but I’m still bullish on their future. The pandemic has hit retailers in different ways, and Nordstrom has not benefited in the least. As noted, even before the pandemic Nordstrom was searching for new growth, and so the pandemic was especially challenging for them. Despite the challenges, Nordstrom has the financial strength and continuity of ownership to help navigate the short- to mid-term and I am confident that they will survive. However how Nordstrom fares in the long-term is another question.

Bob Phibbs
BrainTrust

Nordstrom is exposed more than other department stores to fears of COVID-19 — not necessarily the virus itself. Their big markets of WA, CA, and NY need to be on a more firm footing. That said, I think the Nordstrom shopping experience has a long way to go to truly make a consumer open their wallets with their associate interactions.

David Naumann
BrainTrust

The shift to work from home has significantly impacted consumer demand for upscale fashion apparel. Some of Nordstrom’s competitors have a broader mix of price points and that has helped them as consumers shifted their apparel spending to more casual and less expensive options. Nordstrom Rack is in a good position for today’s consumer demand if it solves its supply chain challenges.

Christine Russo
BrainTrust

Reportedly, 70 percent of Nordstrom’s sales on their earnings call came from their loyalty program. Sounds to me like there is a double-edged sword — loyalty engagement is high yet there isn’t enough traction from clients not enrolled in the loyalty program.

Liza Amlani
BrainTrust

Nordstrom is the department store of choice for the affluent consumer and it’s important for the brand to be consistent in its assortment offering across full-price and Rack stores.

A focus is needed on elevated product choices and luxury brands to delight and entice the customer, localized and exceptional, and differentiated by digital first data to get closer to the customer and what they are looking to buy.

I was in a Nordstrom Rack yesterday and the offering was thin with a very limited selection of contemporary/luxury product choices. The Rack’s biggest competitor in off-price is TJ Maxx/TJX and luxury deals is what gets customers into the stores. If this is missing, then customers won’t bother.

Dick Seesel
BrainTrust

All of the trends affecting retail for the past 18 months — working from home, avoiding the mall, hiring challenges — are aimed squarely at the Nordstrom business model. Until customers can feel assured about returning to the office and to their favorite restaurants and other venues, it’s going to be a slow recovery for Nordstrom. Ultimately, they will return to sales and profit growth vs. 2019 comparisons — but how long will it take?

David Spear
BrainTrust

Dick – I agree with you and to pick up on your last question — “how long of a runway does Nordstrom have to weather the storm?” A huge decision looms for Nordstrom senior leadership. Do they continue with their current business model and try to weather the storm OR do they make a huge pivot to evolve their offerings to a very different shopper today? So when everyone asks the question why do senior executives get paid so much? In a microcosm, here’s a perfect example — and the resulting decision will have make or break consequences for Nordstrom.

Georganne Bender
BrainTrust
Last week I tweeted about not being able to get arrested in a Nordstrom shoe department. I stood there holding a $250 shoe for almost 10 minutes before I caved and approached an associate who was on a cellphone to ask for help. When the shoes were brought out the associate had the shoes I requested, in two different sizes. It wasn’t the “here’s something else you might like” service I anticipated. I have experienced similar lack of service multiple times at Nordstrom stores since I returned to brick and mortar shopping in 2020. The fact that a big part of the sales floor has been devoted to fulfilling online sales, and there are other areas where the fixtures are spread far apart, doesn’t help. I drove an hour to visit Nordstrom with the intention to buy, and honestly the lack of service sent me right out the door. To be fair, I did buy a handbag on impulse in part because the sales associate was so wonderful. This is a training and standards issue.… Read more »
Richard Hernandez
BrainTrust

I agree 1000 percent with you Georganne! I have been to two Nordstrom Rack stores in the past two weeks to look for work shoes (semiformal I guess?) and the assortment runs from thin to none. To go even further, there was no one around to ask when more inventory would be coming to the store. The checkout line was very long. Nordstrom has always been known for their exceptional service and treasure hunt finds, but I saw neither in either store I visited and was disappointed to the point that I might stay away from Nordstrom Rack stores until they have a chance to get back on track.

Georganne Bender
BrainTrust

Treasure hunt is right, but I can’t tell you the last time I bought anything at Nordstrom Rack. The majority of the merchandise isn’t from Nordstrom, so to me it’s just another off-price store.

Nikki Baird
BrainTrust
It’s definitely strange to see Nordstrom struggling where Macy’s and Dillard’s are not! It’s one thing to say that department stores are struggling and Nordstrom is a part of that, and another thing to say that Nordstrom is struggling when other department stores are not. And Nordstrom has been more aggressive in trying to find new ways to reach consumers, and tapping into more digital ways too, so you would hope they could reap the benefits of those investments. My take is that there is a lot of weirdness going on in the supply chain, and to understand any retailer’s results you really need to look there first. If Nordstrom had lower price points because that’s all they could get, they could sell the same amount of units as before and make less, both revenue and profit. Macy’s, etc. all had great results because they had no inventory, so they sold all they had without having to mark it down. Nordstrom does not typically discount as much as other department stores, so they didn’t have… Read more »
David Weinand
BrainTrust

I’m in a small market, Jacksonville, FL but the Nordstrom offerings here really don’t fit the reputation that Nordstrom has had for so long. The full price store is on the small side yet I rarely see associates guiding shoppers through a buying journey. It’s largely empty most of the time. The Rack is very poorly merchandised and my wife and daughters have stopped shopping there as they rarely find anything (I’m a little luckier in the men’s department). It feels like their identity is a bit in flux right now so I hope they are able to pull things together as it is/was a great brand.

Neil Saunders
BrainTrust

At Nordstrom department stores there are a number of unhelpful factors such as a greater exposure to big cities and a more significant focus on workwear which are dragging down performance. At both Nordstrom Rack and department stores, the offer outside of apparel – especially in home, which is a big growth area – is lackluster. However those are only contributory factors. Assortments at Nordstrom Rack have been weak for a long time and that has eroded growth. Many department stores are lacking service and decent ranging, both of which are unhelpful. These are deep seated issues which Nordstrom has yet to get to grips with – something not aided by management’s refusal to openly discuss the problems or, indeed, admit that there are any!

Matthew Brogie
BrainTrust
16 days 20 hours ago

Nordstrom may be suffering from what I refer to as the post-COVID-19 “freeze.” OK, where do I get off saying “post-COVID-19”?! In this context I mean “since the time that most clothing stores were shut down.” The theory goes that there is a bit of a deer in the headlights phenomenon going on where consumers, particularly in this upper-middle part of the market are dealing with so much uncertainty about how their lives will be structured over the next couple of seasons, that they are just not making buying decisions. They’ll get what they need for an occasion, but are holding off on deciding what their “personal brand” should look like until there is a bit more clarity about what they’ll be doing.

Off-price shopping is still strong because it tends to be more functional, and short-term focused, and very high-end shoppers are just blowing through the uncertainty. Purchases at Nordstrom may be a bit more of an investment than the current foggy outlook will allow.

Pamela Garcia
Guest

I feel in general retail is just lagging. I am underwhelmed when I visit any store. There are no choices just inexpensive lackluster merchandise that doesn’t warrant me to shop. Nordstrom is feeling the pain of lack of merchandise selection, high prices, lack of staff, and the pandemic. Shopping isn’t what it used to be.

Brandon Rael
BrainTrust

In the pre-pandemic world. Nordstrom did an outstanding job of pivoting to a customer-first strategy. They extended their reach and capabilities with the Nordstrom local model, a digital-first omnichannel always approach, and a more curated and defined assortment strategy. Unfortunately, the rules of engagement have shifted since the pandemic set in, and it has caused the need for Nordstrom and all the major retailers to reexamine their operating models.

With the dynamic shift to a work from home model, Nordstrom’s high-end luxury fashion apparel has taken a hit. Nordstrom is also very dependent on foot traffic to their cosmopolitan-centered stores in NYC and Washington state. Nordstrom has an opportunity to shift its assortment strategies by keeping a pulse on the casual and remote worker fashion trends and by keeping a digital-first strategy throughout.

Just as Nordstrom pivoted accordingly in 2019, the company is faced with yet another shift in the landscape and an opportunity to address the changing customer behaviors.

Jasmine Glasheen
BrainTrust

Inventory is an issue for all retailers at the moment, but Nordstrom built their business on the in-store experience. Without their legendary sales staff — many of whom were laid off or switched career paths during the pandemic — Nordstrom just can’t justify its ticket prices. Particularly when even higher-income consumers are still riding the wave of a tenuous economy.

How will Nordstrom retain the staff that sets them apart if the Delta variant causes store closures?

Craig Sundstrom
Guest
It’s not yet after the pandemic, so I would question the value of making comparisons — though it’s good to see we are at least not comparing to during the pandemic (and this is independent of my usual doubts about the value of hyperventilating over “below average” — or above, either — irrespective of performance over other periods). All this having been said, a few observations: 1) Nordstrom’s full line/price stores really have very few peers left … which isn’t particularly a good thing because it means Americans are ever less likely to buy what they offer: dress clothing. The pandemic, particularly WFH, have likely eroded this even further … though I expect we’ll hear delusional claims about some looming “return to formality.” 2) their Rack stores are just the opposite: selling what people buy, but also having lots of competition … and without the ability to offer what they do best (lots and lots of full service). Taken together, these represent formidable challenges. JWN has always had a reputation for good management, and I… Read more »
Cynthia Holcomb
BrainTrust
Once I was Nordstrom Design Director. Many a time upon landing in Florence, Italy, people would stop me/us on the street so excited to talk to us about Nordstrom! Exclaiming, even in Italy, home of many wonderful couture designers, how much they loved the Nordstrom fashion brand and aesthetic. Unfortunately, Nordstrom over the past few years has drifted from “style” to now offering 100s if not 1000s of versions of expensive basic t-shirts. Beyond the shoe department, shopping Nordstrom online, the shopper faces a glut of a hodgepodge of products. As a long-time Nordstrom customer, I see no evidence while shopping online of the much-touted Nordstrom product recommendation, personalization engine offering me products I will love and want to buy. Nor do I receive any coherent recommendation from the new technologies “The Outfitter” or the “Fashion Graph” as in any way meaningful to me as a pathway to purchase. Instead, tedious filters and frankly, messy merchandising presentations of rows and rows of intermixed products. Who or what is assorting this barrage of products behind the… Read more »
Ananda Chakravarty
BrainTrust

No doubt that Nordstrom is struggling and growth in their last financials is substantially in the Nordstrom Rack side of the business. Most important was the downgrading of their credit rating recently by Moodys as the company is not recovering as fast as their peers in the market.

The company is suffering from a combination of heavy debt, limited rise from customer foot traffic returning to the stores (key to their survival) and the overall drag on malls where most of their stores are located.

The leadership of Blake Nordstrom before his passing prior to the pandemic was an enormous factor in its success and Nordstrom troubles began around then. Can they come back from this? Yes. Will the current team do it? Only if they return to the basics of luxury and not pull their business quality down to cut costs — better having fewer well functioning stores than stores unable to meet the high standards they’ve set for the industry.

Jeff Sward
BrainTrust

Nordstrom has been one of my favorite stores for a long time. And I looked at them through the eyes of both retailer (to compete with or to sell to) and as a consumer. Now, through the eyes of the consumer, I am reminded that I usually thought of them as an apparel destination for Monday to Friday. The dressier end of the spectrum. The real casual weekend stuff was Macy’s or L.L.Bean. So I suspect the dramatic shift in Monday to Friday behavior for so many people is giving Nordstrom quite the challenge. It’s going to be a tough challenge to migrate to a more casual point of view and maybe even come down a price point or two … and still be the “better” department store so many customers love.

Kai Clarke
BrainTrust

Nordstrom is still beating the same, tired, old drum. It needs to update its message, shift its template, and become a greater force online in order to survive, let alone grow.

wpDiscuz
Braintrust
"Purchases at Nordstrom may be a bit more of an investment than the current foggy outlook will allow."
"Unfortunately, Nordstrom over the past few years has drifted from “style” to now offering 100s if not 1000s of versions of expensive basic t-shirts."
"Without their legendary sales staff — many of whom were laid off or switched career paths during the pandemic — Nordstrom just can’t justify its ticket prices."

Take Our Instant Poll

Is Nordstrom’s full-line or Rack banner performance more worrying?

View Results

Loading ... Loading ...