For many years, Nordstrom has been regarded as a poster child for how traditional retailers should respond to the rise of e-commerce.
But, as the past year has shown, even Nordstrom isn’t immune from the larger forces rocking brick-and-mortar retailers these days, with department stores hit particularly hard.
While Nordstrom’s total sales have risen over the past year, its profits have not.
And perhaps most worryingly, sales at the company’s full-line stores – the big downtown or mall anchor operations that bring the bulk of Nordstrom’s business and have shaped its reputation for stellar customer service – have logged five straight quarters of year-over-year declines.
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Whether that extends into a sixth quarter, including the all-important holiday shopping season, will be revealed Thursday when Seattle-based Nordstrom reports its fourth-quarter and year-end results.
“The scary thing for retailers is: What if you did everything right and you’re still performing poorly,” said Neil Stern, an analyst with retail consultancy McMillanDoolittle. “Which, I think, is kind of the Nordstrom story right now.”
Since early on in e-commerce’s transformation of retailing, Nordstrom has invested heavily in technology, improving its website, pushing out new mobile shopping features, and integrating its online and in-store inventory systems. It also grew its assortment of merchandise online and expanded its warehouses to handle more internet orders.
That paid off as Nordstrom outshone other retailers and grew its online sales, a rapid growth that’s continuing even now. But it’s come at a price – namely, higher expenses.
And Nordstrom, like other retailers, is being buffeted by a sea change in consumer spending habits. It’s not just that purchases are increasingly shifting online. It’s also that mall traffic is reportedly declining, shoppers are more apt to flock to discounters such as T.J. Maxx, and consumers are looking to spend their money on experiences rather than things.
The recent news from other retailers has been gloomy. Macy’s, Sears, Kohl’s, J.C. Penney and Target all reported weak-to-dismal holiday sales. Macy’s and Sears also announced dozens of store closures nationwide. Even Amazon, whose sales soared in the holiday quarter, couldn’t meet Wall Street’s revenue and profit expectations.
While Nordstrom has announced a few store closures over the years, including one full-line store in San Diego last year and one slated to close this year in Santa Ana, Calif., it has not announced more widespread closures along the line of Macy’s or Sears/Kmart.
Nonetheless, Nordstrom said earlier this year that “we’re always keeping a pulse on performance and real-estate agreements.”
Nordstrom realizes it needs to make some changes – fast – and has started to do so. But it’s an open question whether the company can turn around the sales trajectory, especially at its full-line stores, and whether it can do so fast enough.
“A lot of retailers are flailing,” Stern said. “They know they need innovation, something breakthrough, but they don’t know quite how to do it.”