Nordstrom’s capital expenditure
Upscale retailer Nordstrom (JWN) is investing heavily in the expansion of Nordstrom Rack stores, entry into the Canadian market, and the enhancement of its online business. The Consumer Discretionary Select Sector SPDR Fund (XLY) and SPDR S&P Retail ETF (XRT) had 0.50% and 1.01% holdings, respectively, in Nordstrom as of February 11, 2015.
As shown in the chart above, Nordstrom’s capital expenditure from fiscal 2009 to fiscal 2013 was $2.2 billion. Nordstrom plans to spend $3.9 billion from fiscal 2014 to fiscal 2018.
Nordstrom expects to invest 31% or $1.2 billion of the $3.9-billion planned capital spending to strengthen the company’s technology infrastructure across all channels. The company is focusing on enhancing the online shopping experience by working on speed and expanding merchandise.
Also, Nordstrom has rolled out mobile kiosk devices and has provided tablets to make its POS (or point-of-sale) devices completely mobile. These POS devices allow sales staff to help customers check out from anywhere in the store, thus improving the shopping experience. Plus, POS devices help the staff to look for a product across the company’s inventory.
Nordstrom is investing more in technology infrastructure because the company expects more than 50% of its future sales to come from online channels and Rack stores.
Canada and Manhattan stores
Nordstrom has allocated 23% or $0.9 billion of its planned capital expenditure over the next few years to store openings in Canada and Manhattan. The company expects to launch its first full-line store in Manhattan in 2018. In September 2014, Nordstrom opened its first Canadian store in Calgary. The company plans to have opened five more stores in Canada by 2017.
Around 46% of Nordstrom’s capital expenditure will go towards new store openings and the revamping of existing stores. Nordstrom’s competitors are also investing in new stores and upgrades.
Macy’s (M) is spending on store remodeling, digital channels, and the renovation of its flagship Herald Square store. Dillard’s (DDS) had estimated fiscal 2014 capital expenditures of $155 million that went towards new stores and the remodeling of existing stores.
Luxury retailer Neiman Marcus expects its fiscal 2015 capital expenditure to be in the range of $300 million to $320 million on a gross basis. In addition to spending on new stores and remodeling, the company is strengthening its e-commerce business.