Calls for the death of brick-and-mortar retail accept added as many aloft administration aliment abide to abode black sales performance. But one ascendant name seems to have separated itself from the pack: Nordstrom (JWN).
“Nordstrom appears to be years advanced of its aeon in agenda initiatives and development of its off-price concept,” according to Susquehanna’s Bill Dreher. “It is one of the few department aliment with bright affairs assuming after-effects to abode aberrant changes across-the-board through the industry.”
The company’s 1.7% same-store sales advance in the second division airy the trend of negative sales from aeon like Macy’s (M), Kohl’s (KSS) and JC Penney (JCP).
While the banal is bottomward 6% year-to-date, it’s about outperforming peers.
These moves up accept been apprenticed by after-effects and not aloof the contempo rumors that it might go private, according to analysts. And it’s not about luck, either. The company’s advancing and aboriginal moves into two key advance areas — e-commerce and off-price — are amid it from the pack. Above beheading and chump account accept additionally differentiated the brand.
Nordstrom generates 23% of its sales online and management expects that number will exceed 25% by the end of the year. This stands able-bodied aloft added administration stores: Macy’s and Kohl’s accept 16% online assimilation and JC Penney has 14%. Nordstrom’s beyond online attendance is key for sales growth, according to analysts, abnormally in the wake of ascendancy from online behemoth Amazon (AMZN).
Nordstrom didn’t get there overnight. The aggregation was one of the ancient entrants to e-commerce, ablution its full-price online arcade armpit in 1998 and continuing to innovate at a fast clip, according to RBC. It bought flash auction armpit HauteLook in 2011 for $180 million, appearance the aboriginal time a acceptable banker acquired a aggregation focused on online clandestine sales. It further acquired barter by building partnerships with online-first brands aboriginal on, including announcing a 2012 affiliation with Bonobos.
“[Nordstrom] currently offers one of the bigger online adventures in retail with a no-minimum for chargeless aircraft policy, as able-bodied as added conveniences including a ‘text to buy’ app, tag and acclaim agenda scanning, in-store pick-up, and argument notifications,” RBC’s Brian Tunick wrote.
On the second-quarter appointment call, Blake Nordstrom, the company’s co-president, accent its priority to body on the company’s acknowledged online strategy, including efforts to use e-commerce to animate added in-store traffic.
Nordstrom’s “Reserve Online & Try in Store” will aggrandize to 50 aliment by the end of the year, he said, with 80% of barter who try the service allotment to boutique this way again.
“We’ve avant-garde our platform, enabling us to access the acceleration and activity of enhancements to our artefact pages, aeronautics and content,” he added.
The company’s online belvedere has additionally helped it abound its adherence presence, now with 9.4 actor alive rewards associates that fabricated up 56% of sales aftermost quarter.
Meanwhile, Nordstrom’s off-price offering, “Nordstrom Rack,” has provided a cardinal advantage.
In the second quarter, absolute off-price sales rose 9.8%, with commensurable abundance sales up 3.1%, an advance of 100 base credibility from aftermost quarter.
The company’s 232 Rack abundance locations has developed anytime back the aboriginal area in 1973, with sales aided by its aboriginal website in 2014.
Off-price now represents about 30% of the company’s revenue.
Meanwhile, Macy’s off-price concept, “Backstage,” was formed out aloof in 2015, authoritative it abundant later to the advantageous off-price game, area names like TJX (TJX) and Ross Aliment (ROST) accept connected to soar.
Beyond amount cardinal initiatives, Nordstrom’s chump account has set it apart, according to analysts.
“[Nordstrom’s] above chump account is addition agency that positions it added defensively against antagonism at the capital and online,” Tunick wrote in a contempo note. “Nordstrom’s asymmetric accent on areas that crave a aerial akin of account including adorableness and cossack makes Nordstrom a destination for those categories.”
The company has invested in partnerships with trending brands via shop-in-shops, allowing it to accompany added action to aliment with basal risk, Tunick added. Partnerships accommodate Madewell, TopShop, Warby Parker and Baublebar, which accept become important cartage drivers.
Nordstrom has additionally been able to side-shuffle the boundless discounting environment that has hit advantage at peers.
Its promotional strategy, including its just-completed ceremony sale, offers brand-new arrivals at bargain prices. This contrasts with the boilerplate action to offer discounts on inventory that doesn’t sell, which has been espoused by peers.
“What absolutely drives our business is addition and approved amount flow,” Blake Nordstrom said on the company’s second-quarter appointment call. “And alike if you looked at an ceremony sale, we did able-bodied with ceremony product, but we did decidedly able-bodied with approved amount artefact and auction too.”
The company’s gross margins have additionally been aided by the rollout of private-label, which outperformed in the best contempo quarter. This is additionally decidedly important, as bell-ringer brands like Michael Kors (KORS), Ralph Lauren (RL) and Coach (COH) accept afresh fabricated efforts to offer beneath commodity at administration stores.
“When done right, the proprietary brands can be a absolute asset for us,” Peter Nordstrom, the company’s co-president, said on its second-quarter appointment call. “And we’ve had a lot of acceptable success over the years. So I anticipate it’s nice to accept that comedy itself out.”
Nicole Sinclair is markets contributor at Beast Finance.
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