Nordstrom Rack
by Stephen Garner
Nordstrom Downtown Seattle Flagship
Nordstrom’s Downtown Seattle Flagship

Nordstrom Inc. reported sales and profits Thursday that fell short of expectations for the fourth quarter, which includes the holiday season.

Fourth quarter net earnings were $151 million and earnings before interest and taxes (EBIT) was $350 million, or 7.6 percent of net sales, compared with net earnings of $201 million and EBIT of $424 million, or 10.0 percent of net sales for the same period in fiscal 2016 — a total decrease of $50 million.

Despite this decrease, however, total company net sales of $4.6 billion for the fourth quarter increased 8.4 percent, inclusive of approximately $220 million from the 53rd week, compared with net sales of $4.2 billion during the same period in fiscal 2016. Total company comparable sales for the fourth quarter increased 2.6 percent.

In the Nordstrom brand, which includes U.S. and Canada full-line stores, and Trunk Club, net sales increased 6.4 percent and comparable sales increased 2.4 percent. Across U.S. full-line stores and, the top-performing merchandise categories were kids’ and men’s apparel. In the Nordstrom Rack brand, net sales increased 15.0 percent and comparable sales increased 3.7 percent.

Total company net sales of $15.1 billion for fiscal year 2017 increased 4.4 percent, inclusive of approximately $220 million from the 53rd week, compared with net sales of $14.5 billion during the same period in fiscal 2016. Total company comparable sales for the fiscal year 2017 increased 0.8 percent.

Nordstrom Rack“Our Nordstrom Rack business continues to be our leading source of customer acquisition, gaining 6 million new customers in 2017,” said Blake W. Nordstrom, co-president of the company, said on its Thursday earnings call. “Over time, about one-third of our off-price customers cross-shop in our full-price business. In addition, and HauteLook represent our fastest growing business to reach $1 billion. In 2017 it accounted for 18 percent of off-price sales and had new customer growth of 45 percent. Its integrated digital and physical experiences led to 85 percent of online returns being made in store, which drove more than 4 million store trips in 2017.”

Blake added: “We continue to evolve and grow our strategic brand partnerships with a focus on establishing Nordstrom as the partner of choice. Benefits of this strategy include creating a source of newness and discovery for customers, strengthening regular price selling and driving long-term collaborations with preferred brands. These brands, including designer product with limited distribution, and our private label delivered outsized sales growth of 14 percent in 2017 with healthy gross margins.”

As the company looks ahead to 2018, the main highlight will be the opening of the New York City men’s store on April 12. Together, with its women’s store, which is slated to open in fall 2019, this flagship is the retailer’s largest project to-date. The company said it expects this store to be the biggest and best statement of the Nordstrom brand serving as a gateway to new customers both in the U.S. and internationally.

Another key initiative for 2018 is the introduction of Nordstrom Rack in Canada where the company completed its full-line store expansion plans with its sixth store opening in Sherway Gardens, Toronto last September. This year the retailer is planning to open six Nordstrom Rack stores in the Toronto, Calgary, Edmonton, and Ottawa areas. Similar to its experience in the U.S., Nordstrom expects strong synergies between its full-price and off-price businesses, and plan to grow its total Canada business to $1 billion.

“As we move forward, we’ll continue to curate our assortment to provide newness and the opportunity for discovery for our customers,” Blake added. “In our full-price business, our focus is on strategic brand growth through new launches and our existing partners. In our off-price business, leveraging our vendor partnerships enables us to offer the best brands at the best prices.”