Nordstrom Reports Second Quarter And Focuses On Nordstrom Rack Stores

Buffalo, New York, USA

Nordstrom reported second quarter sales and earnings that showed a marked shift of emphasis by the company’s management for Nordstrom Rack stores. Diluted earnings per share were $0.84 compared to last year’s second quarter results of $0.77. It showed excellent expense control since total company sales dropped 8.3 percent. A closer look showed that the Nordstrom banner stores dropped 10.1 percent while Nordstrom Rack stores decreased 4.1 percent.

Seven Nordstrom Rack stores have already opened this year and 10 additional Nordstrom Rack stores will open this year. At the end of the quarter there were 254 Nordstrom Rack stores in operation. With the additional 10 units Nordstrom will end the fiscal year with 264 units. There are 12 Nordstrom Rack stores that have already been announced for next Spring and Fall and there will undoubtedly additional number of these successful units next year.

During an investor’s conference call Pete Nordstrom, President, indicated that the Nordstrom Rack stores are great to build and they attract many younger customers because of the low prices.

Management indicated that the banner Nordstrom stores which decreased 10.1 percent in the quarter had improved from the first quarter decrease of 11.4 percent. With new merchandise attracting some loyal costumers the increase seems minor. The annual anniversary sale brings Fall merchandise at discount prices. After the sale is over, the merchandise is marked to regular prices. It is an effective way to introduce Fall fashions.

The company said that in the second quarter, active sportwear and beauty grew by low single digit. Kid’s apparel and men’s apparel performed better than average for the quarter. Notably women’s apparel was not mentioned.

There are 94 Nordstrom banner stores in operation, and no new units have been announced at this time.

POSTSCRIPT: Nordstrom Rack is becoming a major driver for sales and profits. It seems appropriate that division received a president for the Nordstrom Rack stores. It is difficult for a Nordstrom buyer to decide who will receive the merchandise. Nordstrom Rack stores originally were outlets for Nordstrom merchandise. That is no longer the case, as the size of the Rack organization demands individual care. Management has been doing a terrific job of controlling expenses. Greater care will be necessary as the company grows.