Erik Nordstrom

How will Nordstrom Inc. navigate through a world challenged by social unrest and COVID-19?

According to chief executive officer Erik Nordstrom, it’s a matter of capitalizing on synergies between Nordstrom’s department stores, off-price, online and service hubs; flexibility; the ability to pivot, and the importance of inclusiveness.

Referencing the killings of George Floyd, Ahmaud Arbery, Breonna Taylor and Rayshard Brooks by police, Nordstrom, speaking during a Evercore conference Tuesday, said, “We’ve always tried to be positioned as a retailer and an employer as an inclusive place. We sell nice things. We certainly want to carry the best fashion the world has to offer. But we sell it in a very inclusive way where it’s not intimidating, where people can be themselves. And that means where employees can be themselves as well. I think part of our reputation that we’re fortunate to have is for having good people, especially in our stores, people who care about their customers.

“[Inclusiveness] is of immense importance to our customers, to our employees,” he said. “And it’s important that we play our part in being part of solutions. It’s a responsibility we take very seriously. We have a good track record, but we also believe we need to do more.”
“We as a company, our values and culture is really about being inclusive where people feel comfortable not only shopping but being who they are as an employee and bring their authentic self to be with us,” added Anne Bramman, Nordstrom’s chief financial officer. “On top of that, we’re experiencing a pandemic across the world. And it’s really important to us, and we take our responsibility very seriously, about keeping our employees and our customers safe during these turbulent times.”
Nordstrom stressed that the pandemic is accelerating trends. “In particular, the last couple of months through the pandemic, the synergies between digital and physical have become more important. And we certainly believe the changes that have come on these last couple of months, which have been severe in our industry, are very much an acceleration of what’s been in place for some time now, certainly the growth of e-commerce, but the changing nature of what physical retail is, that connection between digital and physical not just having a big e-commerce channel.

“We can pivot, which in these times of uncertainty, has become even more important. I’d say a good example the last couple of months is our ability to fill orders from our stores. Normally, for full price, about 20 percent of our orders are filled from our stores. With stores being closed and inventory being somewhat trapped there, we moved over 50 percent of our [online] orders for most of the last two months from Nordstrom stores. We’re able to fill some orders from our Rack stores for rack.com. This flexibility, the synergy, has helped us get through this time. It helps us be a more efficient business, but most importantly, it helps us serve customers on their terms.”

Coming out of 2019, Nordstrom was in a “strong financial position” and saw strong sales trends and healthy inventory levels, “setting us to react very quickly to what we saw happening in the last several months. The momentum that we had in the business in the second half of 2019 continued into February. We actually were, on a top line perspective, exceeding some of our plans.

“Being based in Seattle, an early COVID-19 epicenter, I would say we had a little bit of an advantage. We reacted very quickly and had a lot of scenario planning, stress testing how this could impact us. It was really pivoting toward liquidity, cash and managing our biggest investment, which was inventory. And in our business, it’s pretty perishable. So we did some fund-raising. We really managed our cash burn. We’ve reduced our expenses, we really leveraged our inventory throughout the whole ecosystem.”

By the end of the quarter,  inventory was down 25 percent, by reducing receipts and generating customer demand through marketing and promotions and utilizing fulfillment capabilities.

Nordstrom said about 75 percent of his stores are reopened and 90 percent will be by the end of this week. “We’re a little ahead of our plans so far, more so in our Rack stores than our full-line stores. It’s very early. We just opened up California last week, which is our biggest state.

“With labor scheduling, we actually have a lot of flexibility there. We have people in the stores filling orders. So depending on the traffic, we could flex that pretty easily and quickly respond.…There’s business to be had. It tends to be very promotional. That pull on the markdown lever is effective in driving some topline.”

Since COVID-19 hit, Nordstrom said he’s seen “a significant acceleration of trends that have been in place before,” such as BOPIS, shopping multiple channels, casualization, people buying fewer suits and ties as they work at home more, a blending of the work wardrobe with going-out-at-night or weekend wardrobes.

“And there’s really no evidence that it’s going to go backward to what it was, not just pre-COVID-19, but years before that.…We don’t think stores are going away. The last few weeks are confirming that. But the role changes. They do become more and more a place to discover product, to pick up product. And for us, we do benefit from engagement with customers, and that physical engagement can take more forms. It could be the traditional journey to a store, a Nordstrom store at a mall or a Rack store, but it can also include services, things like alterations. And those dropping off a return, picking up an order, those services we can do in a full-line store, we can do in a Nordstrom Local store, we can do an a Rack store for full-price customers. So leveraging the physical assets that really we already have and looking in different ways is a trend that’s only going to accelerate.

“There’s a case to be made that there’s going to be too many goods in the pipeline,” Nordstrom added. “And there’s a case to be made that actually vendors have pulled back a bit. We’ve heard some of that for the back half of the year. I think in either scenario, for us to maintain the flexibility for these uncertain times, but also to ensure we have the right goods, requires more of a partnership with our best vendors, our best brands.”