Following a strong year and Christmas quarter, Seattle-based Nordstrom Inc. is boosting investments in e-commerce, where it sees the most growth, as well as in planning and allocation, and mobile devices.
This story first appeared in the February 17, 2012 issue of WWD. Subscribe Today.
The company is also sustaining heady growth of its Rack outlet division, with 15 openings planned this year on top of last year’s 18, and for the last year has been eyeing Canada for expansion, although getting the right real estate there is tricky.
For the year ended Jan. 28, Nordstrom’s total sales surpassed $10 billion for the first time, and rose 7.2 percent on a comp-store basis, while the Rack outlets surpassed $2 billion in volume. Net earnings rose 11.4 percent to $683 million, from $613 million in 2010. Earnings per diluted share were $3.14, compared with $2.75 a year earlier.
The fourth quarter net rose 1.7 percent to $236 million, or $1.11 a diluted share, compared with $232 million, or $1.04, for the same quarter a year ago. Same-store sales rose 7.1 percent to $3.17 billion, versus $2.82 billion in the year-ago period.
This year, Nordstrom expects same-store sales to increase 4 to 6 percent, and earnings per diluted share in the range of $3.30 to $3.45. Also, Nordstrom has decided to break out same-stores sales across the full-line, Rack and direct divisions quarterly.
On the brick-and-mortar side, one full-line store is planned. The company has 117 full-line units and believes it could ultimately operate 125 in the U.S.
Erik Nordstrom, president of stores, characterized Canada as “an attractive market for us. We have a lot of customers there, being as close to the border as we are. It’s a healthy retail market but a tough real estate market. We think we can learn a lot [in Canada] that could inform us for expansion after that. At this point, it is a real estate question and we haven’t answered that yet.” Vancouver is likely the first target since it is close to Nordstrom’s Seattle base.
On the merchandise front, Nordstrom did best in handbags, designer labels and cosmetics last quarter, while footwear and online sales overall were robust all year. In addition, “regular-price selling remains at historically high levels,” said Blake Nordstrom, president of Nordstrom Inc.
Women’s apparel overall, however, continues to be disappointing, though the company has been experimenting with a new format at stores in Nashville and St. Louis. The format has fewer divisions between departments and a better flow through women’s.
“It’s been a challenging year for us and that prompted some changes,” said Pete Nordstrom, president of merchandising, referring to the women’s apparel business and the January departure of Loretta Soffe, executive vice president and general merchandise manager for that area.
Despite that, Nordstrom’s direct business grew close to 30 percent in 2011, and was lifted by enhanced service and free shipping and returns launched in September. A small “pilot” testing same-day delivery followed. There will be a $140 million investment in e-commerce this year, representing 30 percent of the total capital budget for the year, compared to $100 million in 2011. Nordstrom plans to expand the online assortment, boost the e-commerce team with another 400 employees, continue to rollout mobile devices to sales associates and further customize the customer engagement online.
The HauteLook Web site, owned by Nordstrom, saw a 60 percent sales gain and a doubling of membership to over 7.5 million last year, though the acquisition was a 23-cent drag on earnings last year and is expected to be the same this year.