Service with a smile is a part of Nordstrom's corporate culture.
One of the nation's largest upscale apparel and shoe retailers,
Nordstrom sells clothes, shoes, and accessories through more than
115 Nordstrom department stores and over 190 off-price outlet
stores (Nordstrom Rack) in nearly 40 states and online. It also
operates a pair of Jeffrey luxury boutiques, a "Last Chance"
clearance store, online private sale site HauteLook, and
personalized clothing service Trunk Club. With its easy-return
policy and touches such as thank-you notes from employees,
Nordstrom has earned a reputation for top-notch customer service.
Nordstrom family members, who own about 25% of the retailer's
stock, closely supervise the chain.
The family-run company operates two business segments. The
Retail segment, which accounted for 98% of Nordstrom's revenue in
fiscal 2016 (ended January 2016), includes sales from its full-line
and Nordstrom Rack stores as well as from its Nordstrom.com,
nordstromrack.com, Hautelook.com, Trunk Club.com, Jeffrey, and
Canadian operations. Its Credit segment (3% of sales) owns a
federal savings bank, Nordstrom fsb, through which it offers a
private-label credit card, two co-branded Nordstrom VISA cards, and
a debit card for Nordstrom purchases. The cards also include a
loyalty program that rewards shoppers depending on their spending
Nordstrom's full-line stores generated nearly 53% of its net
sales in FY2016, while its Nordstrom Rack stores contributed
another roughly 25%. Its fast-growing Nordstrom.com channel
generated 16% of net sales, while its Nordstromrack.com and
Hautelook channels combined made up nearly 4%.
By product, the company generated 31% of its FY2016 net sales
from women's apparel, while shoe sales made up another 23%. The
rest of its net sales came from men's apparel (17%), women's
accessories (12%), cosmetics (11%), kid's apparel (3%), and other
Nordstrom has nearly 334 full-line and Nordstrom Rack stores in
39 US states, and three Nordstrom full-line stores in Canada.
California is the retailer's largest market with 78 full-line and
Rack stores. Other major markets for the chain include Florida,
Texas, and Washington.
Sales and Marketing
Nordstrom has boosted its advertising spend in recent years. It
spent $227 million in FY2016 on advertising (net of vendor
allowances), up on $195 million in FY2015 and $167 million
Nordstrom's revenue has been marching onward since 2010,
advancing a further 7.5% in fiscal 2016 to $14.4 billion. Its
program of net store openings continued, with the opening of five
full-line Nordstrom stores (two in Canada) and 27 Nordstrom Rack
stores pushing up growth.
Full-price net sales in full-line Nordstrom and Nordstrom Rack
increased 2.7%, while off-price sales in Nordstrom Rack climbed
9.9%. Shoes and Cosmetics was the Group's best-performing category,
while the South was the best-performing region.
Nordstromrack.com/HauteLook experienced outsized growth, with a net
sales increase of 47%.
However, despite the revenue growth, net income has been less
impressive in recent years, and fell 17% in fiscal 2016 to $600
million. Buying and occupancy costs relating to new store openings
dragged down profits, as did higher expenditure on sales and growth
initiatives relating to Canada and Trunk Club.
Cash from operations more than doubled to $2.5 billion due to
the sale of a substantial majority of the company's US Visa and
private label credit card portfolio to TD.
Nordstrom is all about increasing market share, across all
retail channels and by entering new markets. Indeed, in 2015 the
retailer added stores in relatively untapped Canada in Ottawa and
Vancouver, with more stores planned in Toronto in 2016 and 2017. In
2015, the company opened five Nordstrom full-line stores (Ottawa,
Ontario; San Juan, Puerto Rico; Vancouver, British Columbia;
Minneapolis, Minnesota; and Wauwatosa, Wisconsin) and 27 Nordstrom
Rack stores. Additionally, in 2015, they closed one Nordstrom
full-line store in Buford, Georgia.
To date in 2016, the company has opened three Nordstrom Rack
stores (Lafayette, Louisiana; Orem, Utah; and Virginia Beach,
Virginia). A further three full-line Nordstrom stores will be
opened in the remainder of 2016 (two in Toronto, Ontario and one in
Austin, Texas), as well as the opening of 18 additional Nordstrom
The chain also plans to open its first full-line store Manhattan
-- an important, high-profile retail market -- in 2019.
The rapid expansion its its Nordstrom Rack stores is an effort
to reach out to less-affluent shoppers.
The chain also continues to invest in its fast-growing
e-commerce business to expand the merchandise selection, and to
enhance the website and mobile experience with improvement to
search, navigation, and checkout, and increasing the speed of
fulfillment and delivery. Indeed, in late 2015, the company
projected that its online sales would was on track to contribute
about 20% to its overall sales, representing a major part of its
business. The retailer's recent acquisition of Trunk Club presents
an opportunity to grow its online sales, particularly with men.
In October 2015, the company sold off a substantial majority of
its US Visa and private label credit card portfolio to TD Bank
Group, and entered into an agreement for the bank to be the
exclusive issuer of Nordstrom's consumer credit cards.
Mergers and Acquisitions
In August 2014, Nordstrom purchased Trunk Club, a personalized
clothing service for men, for $350 million. The acquisition allowed
the retailer to offer a high-tough personalized shopping
experienced through the convenience of an online platform