Nordstrom ‘in better shape than rivals’

US department store Nordstrom has delivered a mixed bag of results – but is clearly in better shape than its rivals.

With overall sales declining by a modest, but unwelcome, 0.2 per cent and comparable sales remaining firmly in negative territory, Nordstrom has ended its first half on a somewhat somber note.

But drawing direct comparisons with other department stores is rather too simplistic. There is no denying that Nordstrom’s numbers are weak but unlike rivals its declines are relatively recent and the latest numbers come off the back of stiff comparatives from last year when total sales rose by a market-beating 9.2 per cent and comparable sales increased by 4.9 per cent.

It is also the case that some of Nordstrom’s weakness in stores is down to a transfer of trade to online, where the full-price online business continues to expand with growth that is sequentially better than last quarter even though it comes off the back of a 20.4 per cent rise in the prior year. While this does exert pressure on margins, and raises some question marks over the return from investment in stores, Nordstrom is, at least, cannibalising its own sales rather than allowing other online players to do the job for them.

The other area of success amidst the sea of gloomy numbers is the Rack business which, after stumbling last quarter, is now back into solid growth territory. This spin-off is one of the more successful off-price ventures from department stores and it is helping Nordstrom to both clear inventory and expand its reach to customers that many not traditionally venture into its mainstream stores. There is a little cannibalisation between the off- and full-price businesses but, again, this is more favorable than cannibalisation from other retailers.

With a mixture of some hits among quite a few misses, Nordstrom is in much better financial shape than its rivals. Certainly, profit has deteriorated by 44 per cent but the group remains firmly in the black and can be expected to build back profitability as it moves into the second half. This is especially so now that it has cleared down inventory and is buying new stock at a level more aligned to the more subdued demand environment, both things that will help ease up future margins.

Nordstrom may be in a better position than rivals, but it is not immune from wider trends in the market. Like others it has been affected by declining mall traffic and this trend should continue to drag down sales growth across the second half.

This will be a year of treading water for Nordstrom, a marked change from the year of progress it had last year.

  • Carter Harrison is a retail analyst with Conlumino.

You have 7 articles remaining. Unlock 15 free articles a month, it’s free.