Erik Nordstrom

Nordstrom Inc. has elevated Erik Nordstrom to become the sole chief executive officer, while his brother Pete has been named president and chief brand officer.

The new titles reflect their current and ongoing responsibilities. Previously, they were both co-presidents.

“This is not about a hierarchy,” said Erik Nordstrom. “It’s about helping clarify respective roles…Pete and I continue to be partners in ensuring Nordstrom’s success, and we are both focused on executing our long-term plan. We look forward to continue working with our board to deliver on our shared vision for the future of Nordstrom.”

The company also reported that its fourth-quarter net earnings dropped to $193 million compared with $248 million during the same period in fiscal 2018. Fiscal 2019 included $29 million of charges, after tax, primarily representing non-cash asset write-downs resulting from the integration of Trunk Club in addition to debt refinancing costs.

Earnings before interest and taxes were $299 million, or 6.7 percent of net sales, compared with $333 million, or 7.6 percent of net sales for the same period in fiscal 2018. Excluding integration charges of $32 million, EBIT margin slightly decreased compared to prior year.

However, net sales grew 1.3 percent and improved by more than 400 basis points from year-to-date trends, with full-price sales increasing 1 percent and off-price sales rising 1.8 percent.

Digital sales grew 9 percent and represented 35 percent of sales. Online order pickup contributed more than half of digital sales growth in full-price.

Full-year net earnings were $496 million compared with $564 million for fiscal 2018. Fiscal 2019 included integration charges and debt refinancing costs of $29 million, after tax. EBIT was $784 million, or 5.2 percent of net sales, compared with $837 million, or 5.4 percent of net sales, for fiscal 2018. Excluding integration charges of $32 million in 2019 and credit-related charges of $72 million in 2018, EBIT margin deleveraged by approximately 50 basis points.

For fiscal 2019, net sales decreased 2.2 percent to $15.13 billion from $15.48 billion, in line with expectations. Full-price net sales decreased 3.5 percent. Nordstrom operates 116 full-line department stores. Off-price net sales increased 0.2 percent. Nordstrom operates 248 Rack off-price stores. Digital sales grew 7 percent and represented 33 percent of sales.

For fiscal 2020, which does not include any potential impact from the coronavirus, Nordstrom expects a 1.5 to 2.5 percent sales increase and EBIT of $815 million to $855 million.

Last year, “Through our customer focus, inventory efficiencies and expense discipline, we drove improvement in sales trends in full-price and off-price, and we increased profitability during the second half of the year,” said Erik. “Our 2019 results reflected the accelerated rollout of our market strategy, our strength of Nordstrom Rack’s execution, improved merchandise margins and realized expense savings that were 10 percent above our plan.

“As we move forward, we are further leveraging digital capabilities and scaling our market strategy to drive sales and earnings growth. The momentum from our investments and market strategy is enabling us to get closer to customers, transforming the way we’re serving them.”

Nordstrom’s market strategy is about creating greater consumer engagement with and greater access to Nordstrom services such as order online, pick up in store, alterations and styling, across the Nordstrom department stores, Rack off-price stores and Nordstrom Local service hubs, and provide greater convenience. The market strategy also centers on  efforts to leverage inventories more efficiently.

In 2019, the company accelerated its strategy to five top markets — New York, Los Angeles, Chicago, Dallas and San Francisco — resulting in “outsized customer engagement and a lift in sales trends of 80 basis points relative to other markets in the fourth quarter,” the company said.

Based on the results, Nordstrom this year plans to expand its market strategy to five additional markets — Philadelphia; Washington, D.C.; Boston; Seattle and Toronto — for a total of 10 markets, which represent more than half of the company’s sales.

Other plans for 2020 call for launching a dedicated e-commerce site in Canada; ramping up the supply chain network to improve delivery speed on the West Coast, which represents 40 percent of customers; integrating Trunk Club into Nordstrom full-line stores and Nordstrom.com to create a cohesive styling offering across Nordstrom and to gain efficiencies.

The company also said that board members Kevin Turner and Gordon Smith have chosen not to seek re-election at the shareholders meeting on May 20. The board is working with an executive search firm for new directors. The board will reduce its maximum size from 11 to 10 directors over the next two years and introduce a 10-year term limit for independent directors.

The company completed its generational investment cycle with the opening of its Manhattan flagship in 2019, making fiscal 2020 a pivotal point in free cash flow inflection.

“We ended 2019 in a position of strength and have momentum entering 2020,” said Erik.

The company sees its local market strategy for New York City representing a $700 million incremental sales opportunity over time. “Customers have responded well to our services and experiences,” said Erik.

Commenting on the coronavirus, he said the company is monitoring the situation closely “with the well-being of customers and employees our top priorities, and assessing traffic and supply chain implications,” adding, “We haven’t really seen material change or disruption to the supply chain.”

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