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Company: Nordstrom (JWN)
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  By Emphasizing Rack Store Growth, Nordstrom Could Lose Out As Economy Recovers

Since the recession, Nordstrom has placed emphasis on expanding the number of its discount Nordstrom Rack stores. The company is doing this because these stores have had higher growth during the rough economic times as consumers flock to stores looking for discounts on premium and high quality items. The company announced that it would open 17 Rack stores in FY 2010, compared to just 3 full-line stores. Although increasing the number of Rack stores can benefit the company in the short run while the economy is still weak, it means that the company will lose out on long term sales growth. As the economy recovers, consumers will increase their spending and will be more likely to shop at Nordstrom's full-line, rather than its discount stores because full-line stores are bigger, offer the newest fashions, and don't come with the social stigma of sopping at a discount store. The company has already seen the affects of a recovering economy in its same-store sales growth. In Q2 2010, Nordstrom's full-line stores same-store sales growth increased by 9.9%, while decreasing 1% at Rack stores. In Q3 2010, same-store sales decreased by 2.2% at Rack stores. By not expanding the number of its full-line stores, the company is losing out on sales growth as the economy rebounds.

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  Slumping Economy Means Weaker Sales for Luxury Retailers

High end retailers like Nordstrom are suffering through the economic downturn because consumers just aren't spending money on discretionary goods. Nordstrom reported that its Q2 2009 earnings were down 26.6% compared to a year ago, showing that the company is indeed suffering. However, not all hope is lost for the company. Comparable store sales for the company's off-line discount store Nordstrom Rack actually increased for the quarter, indicating that consumers are looking for a bargain. In Q3 2009, Nordstrom plans to open six Nordstrom Rack stores.

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  Nordstrom Announces Huge Same Stores Sales Decline

Nordstrom (JWN) announced after the close 1st quarter EPS of 54 cents a share on a 6.5% same store sales decline. Net income declined by 24%.

After a long string of impressive same store sales increases, Nordstrom’s same store sales turned negative in the Jan08 quarter and were just crushed this quarter (Nordstrom Same Store Sales Chart). Their forecast for the current quarter (Jul08) is for -5% to -7% same store sales (JWN Earnings Release).

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  High Dependency on Holiday Shopping

The fourth quarter of Nordstrom's fiscal year depends upon holiday shopping, which contributes more revenue and profit to Nordstrom's annual figures than any other quarter. A weak holiday season can seriously hurt Nordstrom's end-of-year results, which seems more likely as Nordstrom's sales already lagged in the thid quarter.

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  Fickle Aspirational Customers

A number of Nordstrom's customers are aspirational middle-class consumers who buy merchandise from Nordstrom to try to acquire the upper-class, luxury image invoked by the brands at Nordstrom. These middle-class consumers are more prone to losing disposable income in economic downturns and, in turn, cut back on their spending at high-priced stores such as Nordstrom.

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