Nordstrom's Web site has emerged as the chain's "biggest door" and largest growth initiative, while the main merchandise opportunity is in women's.
Those observations, along with a host of financial goals, were outlined by Michael G. Koppel, Nordstrom's executive vice president and chief financial officer, at a Bank of America consumer conference Tuesday in New York.
Koppel disclosed that Nordstrom's Web site generated $530 million in sales last year and is seen cracking $1 billion in sales in three to five years.
"We're making big investments to support the channel," he said, noting that $80 million to $100 million will be spent to support the channel's growth over the next three to four years, including doubling the size of the fulfillment center in Cedar Rapids, Iowa, to 905,000 square feet and adding features such as enabling shoppers to coordinate looks and create outfits. The company also is updating its direct inventory system so it's the same as that in the stores and upgrading the online checkout procedure. Last year, the Web site unveiled a "boulevard" of designer shops including Armani Collezione, Blumarine, Burberry, Dolce & Gabbana and other top labels.
"Multichannel customers shop four times more than the customer who shops just one channel," Koppel said. "We're going to do things to give them more information on the Web site and make it more flexible for them to shop online and in stores….Our biggest initiative is the investment we're making in the direct channel."
Heady growth on the Web reflects Nordstrom's overall success recently. The $8.6 billion Seattle-based chain reported that 2006 net earnings increased 23 percent and same-store sales rose 7.5 percent.
Koppel cited other key objectives, including:
Lifting EBIT margins to 13 to 14.5 percent over the next three years, from last year's 12.9 percent.
Growing annual square footage 4 to 5 percent, with three Nordstrom stores slated for this year, including one entering the Boston market with a Natick unit, and eight stores slated for 2008. Nordstrom has "a robust pipeline of new store growth" directed at the East Coast, South and Midwest regions, all of which are still underpenetrated, Koppel said. Most stores are 140,000 to 150,000 square feet, though a future unit in Honolulu will be 200,000 square feet and one in Naples, Fla., will be 80,000 square feet.
Surpassing $400 in sales per square foot, which should be easy considering Nordstrom generated $392 per square foot last year, compared with $317 five years ago.
Continuing the string of comparable-store sales improvements; there have been five straight years of gains.
Bringing more brands to Rack, which exceeded $1 billion in sales last year. Currently, 23 percent of Rack merchandise is liquidation goods from Nordstrom stores.
Another major initiative is enhancing women's, where executives see huge opportunities. "Women's does half the market share of what we do in shoes and cosmetics," Koppel said.
"The women's initiative is our single-largest merchandise opportunity. It's underperforming the company,'' Koppel added, though he emphasized that much work has been done to beef up the organization and the strategy. Store presentations have been sharpened so it's easier to see how assortments are differentiated by lifestyle. Also, designer offerings continue to get built up. Nordstrom targets 25- to 54-year-old women with annual incomes of $100,000 and more.
In terms of the progress in women's, Koppel said: "We don't know what inning or quarter we are in. I do know we have a lot to learn. It will take a number of years to really get it where we would like it to be."
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