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Nordstrom's Growth Strategy Is Working in 2015: Will It Continue?

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Part 5
Nordstrom's Growth Strategy Is Working in 2015: Will It Continue? PART 5 OF 6

Nordstrom’s Robust Store Expansion Plans through 2020

New stores in 1Q15

In the first quarter of 2015, Nordstrom (JWN) opened two full-line stores, one in San Juan, Puerto Rico, and the other in Ontario, Canada. The company also opened ten Nordstrom Rack stores in the United States that quarter.

These store openings are part of the company’s plan to open five full-line stores, including two in Canada, and 27 Nordstrom Rack stores in fiscal 2015. The company is scheduled to open its third full-line store in Vancouver, Canada, on September 18. In May 2015, Nordstrom announced that it will hire 1,000 local employees for its Vancouver store.

Nordstrom’s Robust Store Expansion Plans through 2020

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Investment in expansion

Nordstrom has allocated $1.1 billion of its planned capital expenditure over the 2015–2019 period for the new stores it will open in Canada and one in Manhattan, a New York City burough. The full-line store in Manhattan is slated to open in late 2018. Nordstrom has allocated $0.8 billion for other new stores.

In terms of percentages, the investments in new stores in Canada and Manhattan represent ~25.0% of the total $4.3 billion planned capital expenditure over the 2015–2019 period. Other new stores will be allocated ~18.0% of the planned capital expenditure.

The company also plans to invest about 22.0% of its planned capital expenditure in store reinvestments.

Long-term plans

At the end of the first quarter ending May 2, 2015, Nordstrom had 177 Nordstrom Rack stores and 118 full-line stores, including two in Canada. Nordstrom plans to open 25 Nordstrom Rack stores annually to reach 300 stores by 2020. The company also plans to open 15–20 Nordstrom Rack stores in Canada beginning in 2017. Nordstrom aims to open five full-line stores in the United States by 2018.

Nordstrom’s robust store expansion plan, especially for Nordstrom Rack stores, will strengthen its position against department stores as well as off-price retailers like TJX Companies (TJX) and Ross Stores (ROST). TJX Companies has more than 3,400 stores in the United States, Canada, and Europe. As of May 2, 2015, Ross Stores was operating 1,399 stores. Macy’s (M) is planning to open six Macy’s Backstage off-price stores and two international stores in Abu Dhabi. Macy’s makes up about 1.0% of the portfolio holdings of the Consumer Discretionary Select Sector SPDR Fund (XLY).

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