QUOTE AND NEWS
Motley Fool  Mar 24  Comment 
The department store chain's annual report made it clear that the company faces significant challenges -- but it wasn't all bad news for investors.
Motley Fool  Mar 23  Comment 
Department store sales may be poised to continue declining in the years ahead. But that doesn't mean investors should avoid every department store stock.
DailyFinance  Mar 20  Comment 
Filed under: Shop, Fashion, News and Trends The Nike Air Max first launched in 1987. Originally designed by Tinker Hatfield, the iconic sneaker has seen an evolution of styles over the years. From experimenting with different textures and...
DailyFinance  Mar 17  Comment 
Filed under: Lifestyle, Style, Trend Report This week, Nordstrom began selling clear knee mom jeans. For $95 dollars, moms everywhere could treat themselves to a pair of jeans with a window at the knees. Unsurprisingly, the less than...
Motley Fool  Mar 14  Comment 
If Neiman Marcus can't sell itself to Hudson's Bay or another potential bidder, it may be headed for bankruptcy.
DailyFinance  Mar 14  Comment 
Filed under: Shop, Cosmetics, News and Trends For a limited time Nordstrom will be hosting in-store events sharing the scoop on the newest trends,insider tips and latest beauty products. If you can't make into one of their locations, Nordstrom...
DailyFinance  Mar 14  Comment 
Filed under: Finance, Business, Companies Everybody has an off day, and that apparently includes buyers for highly regarded, typically fashion-forward department stores. Read more...   Permalink | Email this | Linking Blogs | Comments
DailyFinance  Mar 14  Comment 
Filed under: Lifestyle, Style, Style Industry Ivanka Trump is discontinuing her fine jewelry collection, the brand's president Abigail Klem confirmed on Monday. The news comes on the heels of multiple retailers, like Nordstrom and Neiman...
Motley Fool  Mar 14  Comment 
Sears Holdings reduced its losses last quarter -- but not enough to make any difference in the long run.
CNNMoney.com  Mar 10  Comment 
Controversy may be good for business.




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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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