In the call, Erik Nordstrom, along with Anne Bramman, chief financial officer, outlined the headwinds impacting the fourth quarter, citing inventory delays leading to excess levels later in the season, increased markdowns and lower-than-expected merchandise margins; higher supply chain shipping costs, and higher labor and fulfillment costs associated with COVID-19. Heading into the holidays, the company increased its receipt plans. They said the company is taking actions to significantly reduce inventory levels in first quarter 2021 when Rack is seen reaching its desired level, and that the company will be “fully repositioned” in the second quarter, when the full-line Nordstrom department stores are seen reaching their desired level.
“The toughest category just broadly is apparel, particularly men’s apparel,” said Nordstrom. “We have a sizable work and more formal assortment. That’s also true in women’s. Fashion apparel is the most perishable. It’s something of concern to us. We are being super conservative on what we are investing in there.”
Nordstrom’s long-term strategy, called “Closer to You,” calls for the retailer to broaden its digital assortment from 300,000 items to potentially 1.5 million over the next three to five years; inject lower price offerings into the Nordstrom Rack off-price matrix, and extend the reach of its three-year-old market strategy, from 10 urban areas currently to 20 this year.
Pre-COVID-19, Nordstrom started gradually building its home assortment, primarily across sheets, towels, decor and cookware. An aggressive strategy for the company’s relatively small home business is being drawn up. With activewear, the company is well into building up the assortment.