Nordstrom Maintains Growth Strategy Despite Lowered Profits

By Sam Lewis

Expanded channels, new store openings, and new distribution center planned for the remainder of 2013 and beyond

Seattle-based, high-end fashion retailer Nordstrom’s plans have not been derailed by a decrease in profits over 2013’s third-quarter. The company is not only maintaining its omni-channel, e-commerce, and brick-and-mortar stores’ growth models, it even bumped up the low-end of its full-year earnings guidance.

For the quarter ending Nov 2, Nordstrom is reporting net income of $137 million. This is a drop of 6 percent compared to 2012’s Q3 earnings of $146 million. The retailer is reporting revenue of $2.87 billion, an increase of nearly 3 percent compared to last year’s $2.81 billion. Comparable store sales climbed just 0.1% company-wide, getting the most benefit from comp store sales increasing almost 4% at Nordstrom Rack stores. Nordstrom is quick to mention last year’s Q2 and Q3 anniversary sale, the largest sale of the year for the retailer, as the catalyst for this year’s lower second-quarter profits. In spite of this, the company raised its full-year earnings forecast to $3.65 to $3.70 per share, above the previous estimate of $3.60 to $3.70 per share. Wall Street’s consensus says Nordstrom’s year-end earnings will reach the higher end of the guidance, reaching $3.68 per share.

Nordstrom’s third-quarter earnings report comes just in time for the upcoming holiday shopping season. This year, the National Retail Federation (NRF) is expecting sales to increase nearly 4 percent, up to $602.1 billion this holiday season. With a late Thanksgiving, there are six fewer days for shoppers to buy all their holiday gifts, but Nordstrom isn’t expressing worry over the shortened buying period. “We’ve looked at this over the years, and years where we’ve had more days and years where we’ve had less days, and we tend to see that the overall shopping bag is relatively the same,” says Nordstrom CFO Mike Koppel. “We planned accordingly and we expect a good holiday season.”

Blake Nordstrom, the retailer’s principal executive officer, president, and director, affirms Nordstrom’s preparedness for the holidays, along with its growth plan for 2013’s fourth-quarter and beyond. “We know that our most engaged customers shop us in multiple channels and spend three to four times as much as other customers,” says Nordstrom. “Using enablers such as technology, Nordstrom Rewards, inventory access, supply chain, marketing, and merchandise returns that we can leverage across the company are critical in making for a seamless customer experience.” Nordstrom will continue to focus its growth strategy around e-commerce and improving the customer experience through channel integration. Over the last two years, Nordstrom.com has experienced 30 percent growth in e-commerce, and 2013 is shaping up to have a similar figure.

Read about Nordstrom's approach to Thanksgving and Black Friday business

Brick-and-mortar expansion is also in the near future for Nordstrom, as it broadens its distribution network and number of physical stores. “We are close to announcing a site for an East Coast fulfillment center to further enhance our ability to deliver on customers' expectations for fast, reliable delivery,” says Nordstrom. The remainder of 2013 will also bring new Nordstrom locations, including four Nordstrom Rack stores, and one Rack outlet. Throughout the third-quarter, the company opened 11 Rack locations and one full-line Nordstrom store. Currently, there are 257 stores company-wide, nearly 20 more than at the ending of 2012’s Q3.

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