Nordstrom vowed in February to make noticeable changes in its business model this year — and on Monday the retailer began to make good on its promise by revealing plans to cut up to 400 jobs.
The Seattle-based company said it would eliminate 350 to 400 jobs in its corporate headquarters and regional support teams through the end of the second quarter. The group employs more than 70,000 people company wide.
Echoing its statements earlier this year, Nordstrom on Monday described the cuts as “changes in its operating model to continually evolve with the expectations of its customers, ensure it is best-positioned to respond to the current business environment and meet long-term growth plans.”
The company also said in an effort to minimize impacts on current employees, it will first look at options such as closing unfilled open positions. Employees whose roles are eliminated will receive separation pay and benefits. These changes are estimated to generate savings of about $60 million in fiscal 2016.
Nordstrom, like many of its peers, has had a series of tough quarters recently as consumer spending on apparel and related products continues to lag. In January, Macy’s said it would cut about 2,100 jobs across its operations, and close 40 stores through this year resulting in another 2,700 job losses, though some of those in-store jobs were to be placed in other positions.
Last October, Neiman Marcus eliminated 500 positions, and in February Wal-Mart Stores Inc. cut more than 100 jobs at its Bentonville, Ark., headquarters in addition to the 450 positions cut there last October.
On Monday, Blake Nordstrom, copresident of Nordstrom Inc., said, “We will never change our commitment to serving customers, but recognize how they want to be served has been changing at an increasingly rapid pace. Meeting our customers’ expectations means we must continually evolve with them. We see opportunities to create a more efficient and agile organization that ensures we’re best-positioned to achieve our goals.”
The financial impact of these strategic initiatives has been incorporated in the company’s financial outlook that was provided on February 18.
Nordstrom’s net earnings for the fourth quarter fell to $180 million from $255 million in the year-ago period. The results were impacted by last year’s incessantly promotional retail landscape and the company’s continued heavy investments in stores and technology. While not as promotional as other retailers in its sector, Nordstrom did step it up last year to remain competitive, which drove some sales but led to a 92-basis point contraction in margin.
Back then, Blake Nordstrom said: “As we look ahead to 2016, we’ve always considered 2015 to be a peak investment year. That hasn’t changed. What has changed is the current environment that we are facing, which requires us to pivot even more as we remain focused on improving profitability. In response, we are making adjustments to reduce expenses and capital expenditures in 2016 and in the coming years.”
Despite some current concerns, Nordstrom is still considered among the most innovative retailers around. Years before the competition, the company got a handle on what drives retail success in the 21st century — the convergence of e-commerce, mobile and store operations to support each other. There has been hefty technology spending, and increasing costs associated with building infrastructure and full-line stores in Canada; pumping up key locations in Seattle, San Francisco, Chicago’s Michigan Avenue and South Coast Plaza in Costa Mesa, Calif., and rolling out Rack. There has also been a string of out-of-the-box acquisitions in brick-and-mortar and the Internet, including Jeffrey stores, HauteLook and Trunk Club, giving Nordstrom new capabilities and growth. The $14 billion retailer hopes to eclipse $20 billion by 2020.
But the spending has sometimes been at the expense of short-term profits and to the dismay of Wall Street. Executives said the emphasis this year would be on lowering costs, including moderating increases in tech spending and other areas, and after years of investing heavily to aggressively grow the business, “spending more time on how to turn that growth into profit.”