Nordstrom Inc. is making good on plans to aggressively expand its off-price fleet, Nordstrom Rack, with the opening of a store in Elk Grove, Calif.
The 25,000-square-foot store won’t open until 2024, but once bowed, it brings the total Nordstrom Rack door count to 64. Nordstrom also operates 23 of its namesake department store locations, five Nordstrom Locals and one Asos location at The Grove.
The Seattle retailer’s announcement comes as it looks for ways to improve its business.
Company executives in March confirmed the winddown of Nordstrom’s Canadian operations, which it said was a way to move focus back to restoring long-term profitability for its U.S. business.
While the effort to improve sales and profitability is multi-pronged, Nordstrom Rack is seen as a key focus point in 2023, in addition to making inventory more productive and improving the supply chain.
“Rack stores continue to be our largest source of new customer acquisition, accounting for more than 40 percent of newly acquired customers in 2022,” CEO Erik Nordstrom told analysts last month during the company’s quarterly earnings update. “Our Rack store fleet is underpenetrated, and we have an opportunity to attract more customers and drive profitable growth through a proven model as we expand our reach with more new stores.”
The company has plans to open 20 Nordstrom Rack stores this year.
Playing Up Brands
Meanwhile, Nordstrom Inc. President and Chief Brand Officer Pete Nordstrom told analysts during that same call, the company would increase its focus on 100 national brands to help drive Rack sales.
“One of the initiatives to drive sales and faster inventory turn is prioritizing 100 strategic brands that are well known and loved across the U.S., but also have room to grow in the off-price space,” Pete said. “Strategic brands have better productivity than other brands in terms of average selling price and monthly sell-through. These include many brands we carry at the Nordstrom banner.”
About 90 percent of the top 50 brands at Nordstrom are also carried at Rack stores, according to Pete.
Erik added the brands the company’s looking to play up at Rack stores are not widely distributed in the off-price channel, giving Nordstrom’s discount stores an edge over the competition.
The tactics are part of an effort to turn around the decline seen at the company during its fiscal fourth quarter ended Jan. 28.
Nordstrom Rack net sales fell 8.1 percent during the quarter.
Meanwhile, Nordstrom Inc. companywide sales were off 4.1 percent for the same period to $4.2 billion. Net earnings fell to $119 million in the quarter, compared to $200 million in the prior-year period.
The pullback in consumer spending was noted in late June, according to Erik, with most of that slowdown occurring at the Rack locations and continuing through the holidays. “Across both banners [Nordstrom and Nordstrom Rack] the softening trend was more pronounced in customers with lower income profiles,” Erik said. “Given the uncertain environment, we are executing with agility.”
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