Nordstrom brothers confident of overcoming trouble in store


For years, Nordstrom enjoyed a reputation as one of America’s best-run department store chains, whose attentive sales assistants shaped the fashion choices of generations of affluent suburbanites.

“They had a playbook that they ran, literally, for decades,” Pete Nordstrom, chief brand officer and great-grandson of the founder of the 120-year-old company, said of his predecessors. “The business model didn’t change much.”

Such predictability is sorely absent from retail today. Even before the pandemic emptied the shopping malls they anchor, department stores were singularly hard hit by the rise of ecommerce. The coronavirus crisis has proved too much for several of Nordstrom’s peers, tipping Neiman Marcus and Lord & Taylor into Chapter 11 bankruptcy protection.

Both Pete and his brother Erik, who is now Nordstrom’s chief executive, started working for the company in that easier era, alongside a third brother, Blake, who died in 2019.

Pete joined in 1976 at the age of 16 as a sales assistant in the shoe department during his summer holidays. Erik similarly started by fitting shoes, and his unglamorous early career moves included oversight of a store in Bloomington, Minnesota.

In interviews with the Financial Times this week, to coincide with a strategy update for Wall Street, the brothers set out their case that Nordstrom cannot only survive the turmoil, but emerge with faster growth and a business model relevant to more of America’s increasingly demanding shoppers.

Line chart of Industry-wide sales ($m) showing US department store sales slump

The strategy includes a radical expansion of the assortment they sell; the addition of far cheaper products to Rack, their off-price discount chain; and a sweeping integration of their 350 stores with an ecommerce business that — unusually in their sector — just surpassed 50 per cent of total sales.

Nordstrom’s merchandising need no longer be bound by the constraints of its stores, Pete Nordstrom said, although it was not trying to be an “aggregator of everything” like Amazon. “Do I think we’ll end up selling insurance or toilets? I doubt it,” he said.

The company told investors that it would increase its merchandise selection fivefold — from 300,000 items to 1.5m — over the next three to five years.

The brothers said homewares — one of retail’s strongest categories during the pandemic, as housebound Americans upgrade their furnishings and appliances — was one focus of their expansion plans. That would put Nordstrom in competition with the likes of Williams Sonoma and Crate & Barrel. 

Nordstrom’s lack of homewares had left it “missing out on a big slice of [the] action” in the sector, said Neil Saunders, retail managing director at the GlobalData consultancy. “Because it’s been very exposed to fashion, its results in 2020 were poor.”

A company which has long touted its superior customer service is now trying to extend that standing online, pulling together data from digital and in-store purchases to personalise offerings and offer virtual styling sessions.

Yet it still sees stores as central to improving online customers’ engagement with its brand, Erik Nordstrom said, serving as hubs for online order pick-ups, returns and alterations. 

Unlike rivals with sprawling real estate footprints, it has focused on a few prime cities, deriving three-quarters of sales from just 20 markets.

Nordstrom was founded 120 years ago by Carl Wallin and John Nordstrom © AP
The company said it would increase its merchandise selection fivefold © Getty Images for Nordstrom

The brothers predict a recovery as more people are vaccinated against coronavirus. “It’s going to shift from headwinds to tailwinds for us as people get out, and there’s pent up demand,” said Erik Nordstrom.

Even as coronavirus cases rose in recent months, Wall Street has become more bullish that Nordstrom is positioned for a stronger recovery than peers, boosting its shares by about 150 per cent since August. Revenue would rebound by at least 25 per cent in 2021 and rise by a “low single-digit” percentage annually over the following three to five years, the company predicted on Thursday.

Nordstrom dismissed concerns that introducing cheaper goods at Rack outlets could endanger Nordstrom’s premium branding. The company had “years of experience” in managing the two brands, he said, noting that a third of Rack customers become full-price Nordstrom customers within a year.

Family members still own about 30 per cent of Nordstrom. They were rebuffed by the board when they tried to take it private in 2018, but Erik Nordstrom said they had no new buyout plans. “We believe strongly that public ownership is the right ownership for us,” he said.

That imposes a scrutiny on the brothers that private family ownership may not.

“The reputation of our company is so tied to our reputation as a family and our reputations individually,” Erik Nordstrom said.

Asked about reports that directors considered appointing a non-family chief executive after rejecting their 2018 offer, Pete Nordstrom said: “What’s been made clear to us is this is not an entitlement programme. It’s a public business and we need to perform and we need to be accountable.”


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