Nordstrom Inc., further maneuvering to manage amid the coronavirus, has canceled more merchandise orders and has planned its Anniversary Sale down 50 percent and postponed it until August.
“Similar to the April/May approach, the company has decided to suspend all full price orders for June/July,” the company wrote in a letter to vendor partners.
Full price orders are for Nordstrom’s department stores. The Seattle-based retailer also operates Rack off-price stores, which would be different merchandise orders.
Nordstrom has yet to set a specific date for launching the Anniversary Sale in August. It’s the company’s biggest sale and volume event of the year, normally staged in July when retail is in the doldrums and most department stores have racks of clearance and no new merchandise. But Nordstrom’s Anniversary Sale is not a promotion or clearance. New fall merchandise is stocked just for the event, with buyers getting orders from vendors when department stores typically don’t get them, and Nordstrom achieving a surge in volume in an otherwise soft sales period. It provides customers with the opportunity to buy new fall merchandise early at a discount for about two weeks.
The Nordstrom Anniversary Sale has become an industry phenomenon, not only because of its popularity and revenue potential but because of its unique format that hasn’t yet been copied by competitors.
The merchandise initially is priced at a discount, generally 33 to 40 percent off. With Kate Spade shoes or some other brand, there might be 20 pairs on the floor on any given day during the year. For the sale, designers and brands might have three items, creating a sense of urgency and exclusivity. Nordstrom locations curtain-off or stanchion-off areas for Anniversary Sale merchandise and it’s always signed well. Nordstrom is strict about not giving non-cardholders access to the presale part of the Anniversary Sale. Consequently, the event is a credit card acquisition tool. When the sale is over, items revert to regular prices. Nordstrom conducts a postmortem and the team quickly starts planning next year’s event, 12 months in advance.
“We are reevaluating our needs for the event,” Nordstrom wrote in the letter to vendors. “Given the high promotional environment during June and July, we know there will be less pent-up customer demand for Anniversary Sale and have planned that event down by roughly 50 percent.
“Only our absolutely best items at compelling prices will be part of the offer and a disproportionate amount of the funding will go to categories that have outperformed the average during COVID…home, cozy, beauty/self care, etc. This will certainly impact our original offer so we will discuss our proposed ideas on call.”
Nordstrom previously canceled all orders for April and May delivery and has decided to suspend all full-price orders for June and July, the company said in its letter.
“July will have the reduced Anniversary receipts if applicable. Any and all order mitigation you can proactively do should be done. We would strongly consider as much newness that can be pushed out to 2021 should be.
“As the business environment shifts we will continue to be as transparent as possible with business decisions.”
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 for two weeks, beginning March 17.
“We’re taking decisive actions across the business to help protect employees, customers and others in the communities we serve,” said Erik Nordstrom, chief executive officer of Nordstrom Inc. “The health and safety of our customers and employees remain our top priority as we continue to make decisions during this rapidly evolving situation.”
To strengthen its financial position, Nordstrom amended its $800 million revolving line of credit and closed on its 8.75 percent secured debt offering of $600 million. “These actions provide additional liquidity and flexibility in response to uncertainty related to the novel coronavirus,” the company said Thursday.
Under the terms of the amendment, the revolving line of credit will be secured primarily by inventory during periods when its leverage ratio exceeds four times or its credit ratings drop below investment grade. During this period, minimum liquidity thresholds will be applied.
Nordstrom exited fiscal 2019 with $850 million in cash. In response to COVID-19, the company previously announced suspension of quarterly cash dividends and share repurchases. It is also cutting more than $500 million in operating expenses, capital expenditures and working capital, including the ongoing efforts to realign inventory to sales trends.
“The actions we are taking are to position ourselves best for our employees, customers and shareholders. This includes proactive steps to strengthen our financial flexibility, including our recent debt offering,” said chief financial officer Anne Bramman. “These measures will provide with additional liquidity and flexibility not just for the short-term but over the longer term as we emerge from this unprecedented time.”
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