Nordstrom has passed the peak of its investment cycle, and capital expenditures should decline over the next several years, the retailer’s chief financial officer, Mike Koppel, told the packed crowd at the UBS Global Consumer Conference.
Koppel said 2015 was the peak year for the investment cycle and that those costs should be coming down. Last year, Nordstrom spent $930 million, or 7 percent of sales, on capital expenditures as it built out its technology infrastructure. That number is expected to drop to $600 million, or 3 percent of sales, by 2020.
The e-commerce business has grown from 8 percent in 2010 to 20 percent of sales in 2015 and is expected to become a third of all sales by 2020. Koppel noted that store business is flat and will probably remain that way, but shoppers are using both the online and physical store in tandem. He said the multichannel consumer spends more with Nordstrom.
Brands also like that Nordstrom has various channels for their products. Koppel said the store can offer a full-price experience to vendors, but if the vendor has some inventory it needs to clear out, Nordstrom can offer them an off-price option.
Of course, it didn’t take long for the Amazon question to arise. Koppel said he has heard that Amazon’s fashion business has grown to $10 billion and they were especially cognizant of them since both companies are based in Seattle. Nordstrom has always seen Amazon as a threat, but believes Amazon will be good at basics, but not as good at fashion turns.
At this point in the transition to creating the online experience, Koppel said Nordstrom has made the technology investment, but the next step is to improve operational efficiencies. The company is one of the few retailers to present an off-price store online. Operationally, Nordstrom needs to make improvements on it. He said some shoppers see something online and expect to see it in the store and that doesn’t always happen.
Koppel said he believed the inventory situation in the industry was getting better this year. “You focus on what you can control and that is inventory,” said Koppel. Nordstrom stock is rising by 1 percent to $55.76.