Nordstrom is Losing its Luster

By: Harshita Himatsingka

Nordstrom is the third biggest retailer in the United States; its shares reached an all-time high of $83 last year and moved to $72 in the June quarter. However, after the steady rise, its shares fell to $50, a big 38 percent decline from their peak. Nordstrom’s earnings per share dropped from $3.72 in the fiscal year of 2014, by 15 percent to $3.15 in the fiscal year of 2015. The earnings reported for the last quarter were very disappointing. The fourth-quarter of 2015 was a bad time for the company as warm weather in most east coast areas in the country restricted the sale of winter merchandise. Even though the store offers perks like free shipping, in-store pick up for online orders and many other services none of its rival companies do, its profits dropped by $600 million—17 percent—and expenses rose by 10 percent. 

Most analysts said that it has been a victim of retail sluggishness as it discounted merchandise from all of its sectors. While Nordstrom held storewide promotions across its various departments, it failed to match its prices to other rival retailers, which led to a 1.8 percent decline in its gross margin. Its discount Nordstrom Rack stores also posted its third same-sale decline of the year, and is also struggling to maintain its online sales due to high costs by competing companies such as Amazon. 

However, Nordstrom is trying to step it up and take charge. The company wants to introduce its brand to new kinds of mass customers. Management at Nordstrom wants to start operating approximately 300 Rack stores by 2020, which is 100 more stores compared to today. It is also looking for product lines that are not sold through its rival companies, and wants to build more products for its private brand. In addition, the company will be slowing capital investments to $300 million over the next five years, to $4 billion.  

Whether these efforts will make any major changes to the retailer, only time will tell. 

Sources: www.cnbc.com, www.forbes.com, www.thestreet.com, www.wsj.com

Photo: www.bizjournals.com