QUOTE AND NEWS
TechCrunch  Jul 21  Comment 
 Personal styling service Trunk Club first got its start by appealing to men who don’t like to shop by offering to ship hand-picked designer clothing to their homes for free. Then, customers only paid for those items they kept. Today, in the...
Market Intelligence Center  Jul 8  Comment 
For a hedged play on Nordstrom Inc. (JWN) MarketIntelligenceCenter.com’s algorithms selected the Oct. '15 $77.50 covered call for a net debit in the $74.66 area. That is also the break-even stock price for the covered call. This trade will...
TheStreet.com  Jun 19  Comment 
NEW YORK (TheStreet) -- Nordstrom  had its price target lowered to $83 from $84 at Deutsche Bank which reiterated its "buy" rating. Deutsche Bank reduced 2015 earnings estimates to $3.76 from $3.84 per share, and decreased 2016 earnings...
Market Intelligence Center  Jun 16  Comment 
Nordstrom Inc. (JWN) traded between $72.85 and $73.79 before closing at $73.15 Monday and presents some attractive trading opportunities today. MarketIntelligenceCenter.com’s algorithms have picked a Oct. '15 $72.50 covered call for a net debit...
Benzinga  Jun 15  Comment 
Nordstrom, Inc. (NYSE: JWN) shares had a magical run from the 2009 low in the low teens to the 2015 peak at just above $80 – truly remarkable considering this is a retail store chain. Since peaking earlier this year, however, the stock has...
TheStreet.com  Jun 4  Comment 
NEW YORK (TheStreet) -- Shares of Nordstrom are lower by 1.32% to $73.27 in pre-market trading on Thursday morning, following a rating downgrade to "neutral" from "outperform" at Credit Suisse. The firm said it reduced its rating on the...




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Nordstrom (NYSE: JWN) sells apparel, shoes, cosmetics and accessories to customers who are typically between 25-54 years of age and generate a household income in excess of $100,000. The company positions itself as an "affordable luxury" retailer that operates all of its 100+ Nordstrom full-line department stores in the U.S. exclusively. The company also operates 70+ off-price Nordstrom Rack stores.

Near-luxury and discount retailers, like Nordstrom, are vulnerable to slowdowns in consumer spending on such merchandise, which typically exaggerates the peaks and valleys of the overall economy.

Company Overview

Based in Seattle, Washington, Nordstrom has developed its own niche in the retail industry as an "affordable luxury" retailer, positioned between mid-tier retailers such as the Macy's Inc. (M) stores and high-end, luxury retailers, including Saks Fifth Avenue and privately-held Neiman Marcus. The company sells high-quality apparel, shoes, cosmetics and accessories, targeting customers between 25-54 years of age with an average household income of $100,000.

Business Segments

The company operates through two principle branches:

Retail Stores, Direct, and Other (96% of net sales)

  • Retail Stores: Nordstrom primarily gets its revenues from sales of high-quality shoes, cosmetics and accessories. The company's stores sell merchandise in seven different categories:
  1. Women's Apparel: 34% of net sales
  2. Shoes: 22% of net sales
  3. Men's Apparel: 15% of net sales
  4. Women's Accessories: 12% of net sales
  5. Cosmetics: 11% of net sales
  6. Children's Apparel: 3% of net sales
  7. Other: 3% of net sales
  • Direct: Nordstrom also sells its merchandise through its e-commerce website Nordstrom.com and catalogs.
  • Other: This segment involves the product development and design team, Nordstrom Product Group and corporate center operations

Credit (4% of net sales)

  • Credit: In owning its own federal savings bank, Nordstrom offers a private label card, two co-branded Nordstrom VISA credit cards and a debit card for Nordstrom purchases. These give rise to a shopping-based loyalty program designed to create incentives for increased customer consumption.

Business Growth

FY 2010 (ended January 30, 2011)[1]

  • Net sales increased 12.7% to $9.3 billion.
  • Net income increased 39% to $441 million.

Trends and Forces

Near-Luxury Retailers Suffer in Sluggish Economy

Near-luxury retailers, like Nordstrom or even Abercrombie & Fitch, that depend on aspiring middle class customers -- customers that are affected by recessions and cut back on spending -- are the ones that suffer through tough economic times. As these consumers cut back on spending, Nordstrom feels the pinch on its bottom line.

Innovate Online Tools Allow Nordstrom To Gain Competitive Advantage In Rebounding Economy

New technology, such as RFID chips, has allowed companies to better manage their stores. Using this technology, Nordstrom has developed a way to better manage its inventory and to better serve its customers. Customers that go to the store's website are able to see what items are available at a specific store location, as well as items that are available in the company's warehouses. This system has made it much easier for customers to shop online, and has even allowed customers to find items online and then request to try them on at stores. The change in inventory management has allowed Nordstrom to better serve its customers, which has translated into higher sales.

Competition

Nordstrom's competitors in the mid-tier department store industry include Macy's Inc. (M), Dillard's (DDS) and J.C. Penney (JCP). These companies provide near-luxury full-price items but also have discount stores as well. Mid-tier department stores are the most affected by the economic downturn because they rely on aspiring middle income consumers to generate revenue-- middle income consumers typically cut back spending and look for discounts as a way to save money during tough economic times.

Nordstrom also competes with companies in the luxury retail industry which include Saks Fifth Avenue (SKS) and companies in the discount retail industry like Kohl's (KSS). Nordstrom occupies a positioning between discount and luxury department stores in terms of the price it sells its merchandise at.

References

  1. JWN 2010 10-K pg. 16
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