Nordstrom Inc., reexamining its store fleet in the context of the coronavirus and its long-term impact on retailing, is planning to permanently close 16 of its full-line department stores this year.
Nordstrom operates 116 full-line stores in the U.S., Canada and Puerto Rico.
Nordstrom is also restructuring its regions, support roles and corporate organization for “greater speed and flexibility,” the company said in an announcement Tuesday evening. Some merchants were affected, though Nordstrom did not disclose the number of employees who would be let go.
News of the store closings and layoffs confirmed a WWD report earlier Tuesday.
Nordstrom did not disclose the locations, but sources told WWD that some high-profile locations will be shuttered permanently including Naples in Florida, Flatiron Crossing, Colo. and Short Pump Town Center in Richmond, Va.
The restructuring is expected to result in expense savings of approximately $150 million, or 30 percent of the company’s previously announced plans for net cash reductions of more than $500 million in operating expenses, capital expenditures and working capital. These actions, combined with its initial savings plan of $200 million to $250 million, represent a reduction in non-occupancy-related overhead expenses of approximately 20 percent.
For its service, quality of merchandise, upscale shopping environments and relative stability in the challenging retail landscape, Nordstrom is considered perhaps the nation’s sturdiest fashion department store. In terms of price and merchandise, it straddles Saks Fifth Avenue and Macy’s Inc. Nevertheless, eliminating roughly 20 percent of its department store fleet underscores how much COVID-19 has hurt retailing, in particular “nonessential” retailers such as Nordstrom, and the economy.
Sources said this week that Nordstrom has been in discussions with landlords and in many cases is also seeking to amend lease terms, including seeking to have rents based on percentage of sales, which would give the retailer greater financial protection.
Nordstrom temporarily closed all of its stores, including Nordstrom full-line department stores, Nordstrom Rack, Trunk Club clubhouses and Jeffrey in the U.S. and Canada on March 17 and has yet to announce any reopenings.
The department stores slated to close would just never reopen.
In addition to operating department stores, Nordstrom operates 247 Nordstrom Rack off-price stores; three Jeffrey high-end boutiques; two clearance stores; six Trunk Club clubhouses, and five Nordstrom Local service hubs. The company also operates the nordstrom.com, nordstromrack.com, HauteLook and trunkclub.com web sites.
It’s likely that Nordstrom is considering closing some Rack stores though the company did not disclose any plans for Rack in its announcement.
As previously reported, Nordstrom has already taken dramatic steps to strengthen additional liquidity and financial flexibility in response to uncertainties created by the coronavirus. Among the measures taken, Nordstrom amended its $800 million revolving line of credit, and closed on its 8.75 percent secured debt offering of $600 million, as well as sharply cutting operating expenses, capital expenditures and working capital by around $750 million, and has been realigning inventory levels. The Seattle-based retailer also suspended quarterly cash dividends and share repurchases.
“We’ve been investing in our digital and physical capabilities to keep pace with rapidly changing customer expectations. The impact of COVID-19 is only accelerating the importance of these capabilities in serving customers,” said Erik Nordstrom, chief executive officer of Nordstrom Inc., in a statement Tuesday. “More than ever, we need to work with flexibility and speed. Our market strategy helps with both, bringing inventory closer to where customers live and work, allowing us to use our stores as fulfillment centers to get products to customers faster, and connecting digital and physical experiences with services like curbside pickup and returns.”
Nordstrom plans to reopen stores in a phased, market-by-market approach where allowed by local authorities and with the health and safety of employees, customers and communities as a priority. No store reopenings have been disclosed yet.
As reported, the company is shifting its Anniversary Sales, the retailer’s biggest sale event of the year giving preferred customers first crack at buying new fall goods at discounted prices, from July into August.
As it reopens stores, Nordstrom will be doing the following:
• Conducting health screenings for employees.
• Providing face coverings for employees and customers.
• Taking steps to allow for social distancing of six feet or more, including limiting the number of customers and employees in the store.
• Increasing cleaning and sanitization.
• Modifying the fitting room experience.
• Continuing to offer contactless curbside services at full-line stores.
• Altering hours of operation.
• Pausing or adapting high-touch services and customer events.
• Keeping tried on or returned merchandise off the sales floor for a period of time.
As Nordstrom closes its department stores, its online business will grow as a percentage of total revenues. In 2019, e-commerce represented one-third of 2019 sales, including off-price sales online business that exceeded $1 billion, the company said.
“While stores are temporarily closed, the company is generating solid online traffic and conversion and clearing excess inventory through increased marketing and promotional efforts,” Nordstrom said in its announcement.
Nordstrom recently advanced store fulfillment capabilities last month, enabling Nordstrom Rack to fulfill online orders, in addition to already having that capability at Nordstrom department stores. More than half of Nordstrom.com orders are currently fulfilled from full-line stores, and 25 percent of Nordstromrack.com and HauteLook.com orders are now fulfilled by Nordstrom Rack stores.
In addition, Nordstrom recently launched its e-commerce in Canada, with all online sales fulfilled from the six full-line stores there.
More actions to adjust its business to manage through the coronavirus crisis are expected to be announced simultaneous with the company’s first quarter financial report.
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