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Nordstrom Investments Yield Stronger Sales And Stock Boost

nordstrom shares

Nordstrom’s recent investments in Canada and online ventures are starting to pay off in a big way and the Seattle retailer’s stock rallied on Friday as a result.

Income from Nordstrom’s two Canadian stores, as well as The Trunk Club and its discount online sites (Hautelook and NordstromRack) brought in an extra $100 million in revenue in the last quarter, accounting for nearly one-third of the 9.2% sales growth Nordstrom reported on Thursday.

This is the fourth consecutive quarter in which Nordstrom’s sales growth exceeded 9%. Meanwhile, rival Macy’s posted a decline in sales and its shares fell almost 7% this week.

Nordstrom reported profit of $211 million ($1.09 per share), up from $0.95 per share last year, pummeling analyst expectations of $0.90 a share, Seattle Times reported.

Nordstrom spent $350 million to buy the online retailer The Trunk Club and invested millions in opening new stores in Canada while building discount Nordstrom Rack locations and renovating U.S. stores. According to Blake Nordstrom, company co-president, the Canadian market the company entered last year with its first international store is already performing “ahead of plan.”

Starting last year, Nordstrom has worked to reduce the number of days it offers discounts, merging previous sales that were normally confined to specific departments into a smaller number of storewide clearance sales.

The strategy was applauded by analysts at Stifel. Market Watch quoted Stifel analysts as saying that the move will “likely help to lift sales.”

Historically, merchants had category-specific strategies to clear goods. Since mid 2014, all merchandise categories participate in clearance events, aligning the seasonal markdown cadence during major holidays. A shift to a more consistent, storewide clearance activity will likely help to lift sales while contributing to modest gross margin erosion.

In 2015, Nordstrom will have an estimated 67 days of clearance, down from 87 two years ago. Next year, Nordstrom is expected to offer just 50 clearance days to align better with the way people shop during the holidays.

Analysts also pointed out that Nordstrom has achieved what its rivals have failed to do: positive growth across all of its business.

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