With work, travel and occasions back on, customers have returned to Nordstrom - The Entrepreneurial Way with A.I.


Wednesday, May 25, 2022

With work, travel and occasions back on, customers have returned to Nordstrom


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Dive Brief:

  • Beating expectations, Nordstrom’s Q1 net sales rose 18.7% year over year to $3.5 billion, with full-line sales up 23.5% and off-price Rack sales up 10.3%. The strongest growth was in apparel, shoes and designer, as customers refreshed wardrobes for occasions, travel and work, per a company press release.

  • E-commerce was flat to last year as customers returned to stores. Net income reached $20 million, up from last year’s $166 million loss. End-of-quarter inventory was up 23.7% compared to last year.

  • On a call with analysts, CEO Erik Nordstrom announced the Trunk Club apparel box service, which has undergone several tweaks since the department store acquired it in 2014, is shutting down.

Dive Insight:

Nordstrom, which attracts a wealthier shopper than most rivals and whose merchandising is centered around designer and dressier styles, was particularly caught off guard during the height of the pandemic, when consumers stayed home in their sweats.

With weddings and other occasions again on people's calendars and many employees back in the office, Nordstrom is in demand anew. Men's apparel was its strongest category in the first quarter, with double-digit growth in both men's and women's clothing, exceeding pre-pandemic levels, Chief Brand Officer Pete Nordstrom told analysts Tuesday.

"Strength in men's and women's apparel was driven especially by suiting and dresses," he said, according to a Seeking Alpha transcript. "While we always strive for balance across all relevant categories, it is true that event and occasion-based categories are important to our customers and represent a significant portion of our business."

The beleaguered Rack business also appears to be on the mend, after its scramble to undo a disastrous plan to switch up its merchandising in order to reach more value-oriented customers. Still, while Rack sales grew nicely year over year, they fell 3.6% compared to 2019, GlobalData Managing Director Neil Saunders noted in emailed comments.

"This is a chronic underperformance compared to peers and, in our view, shows the division has quite a lot more work to do to get sales back up to prior levels and to win back customers who have deserted it," he said. "While things are now going in the right direction, shop floors are still not looking particularly orderly. However, some of this may be offset by a greater influx of consumers turning to off-price to save money."

Inflation has turned even off-price shoppers cautious, and is adding to freight and other costs. The company is grappling with that, but is also sharpening its focus. In an effort to beef up its assortment of in-demand brands, Nordstrom is adding Allbirds shoes to its regular lineup. And while it's closing the troubled Trunk Club business, the department store is investing in its styling services, because "customers spend seven times more and report higher levels of satisfaction when engaging with a stylist, either in-store or online," Erik Nordstrom said.

Several analysts adopted a wait-and-see attitude about the rest of Nordstrom's year, despite its strong Q1 and raised guidance. William Blair analysts Dylan Carden and Phillip Blee warned that uncertainty about demand remains, even among the higher-income consumers in Nordstrom's base, as do questions about the company's own execution in coming months.

"[K]ey risks to the stock are a further deterioration in customer demand in the back half of the year as sentiment deteriorates; the inconsistency of the Rack business, which always seems to catch investors off guard; and the company’s mixed record of hitting its long-term targets," William Blair analysts said emailed comments. "We would look to see greater consistency in the business before shifting to a more positive stance."

via https://www.aiupnow.com

Daphne Howland, Khareem Sudlow