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Nordstrom’s Off-Price Rack Business Impressed in Fiscal 3Q16

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Nov. 17 2016, Published 6:00 p.m. ET

Off-price business sales

Nordstrom’s (JWN) off-price business delivered 10.2% sales growth in fiscal 3Q16, which ended on October 29, 2016. Nordstrom operates full-line stores in the US and Canada and Nordstrom.com. The department store also sells merchandise at attractive discounts through its off-price business, which includes Nordstrom Rack stores, Nordstromrack.com, and HauteLook.

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Nordstrom Rack stores

In fiscal 3Q16, Nordstrom Rack stores’ sales rose 8.3% on a year-over-year basis to $958 million. The company’s off-price Rack stores continued to deliver higher sales growth than US full-line stores. As we mentioned in Part 1 of this series, the net sales of US full-line stores fell 4.0% in fiscal 3Q16. The performance of Rack stores reflects consumers’ preference to look for bargain deals in off-price stores. Macy’s (M), Nordstrom’s peer, is also expanding its presence in the off-price retailing space through its Macy’s Backstage stores.

The sales of the company’s off-price online channels, Nordstromrack.com and HauteLook, rose 23.3% to $159 million. In the fiscal 3Q16 conference call, the company’s co-president, Blake W. Nordstrom, stated that the company expects the sales of NordstromRack.com and HauteLook to cross over $700 million in fiscal 2016.

Store expansion

In fiscal 3Q16, Nordstrom opened 15 Nordstrom Rack stores and relocated two stores. The company operated 215 Nordstrom Rack stores at the end of fiscal 2016. Nordstrom has been expanding its Rack stores at a faster pace than its full-line stores. In fiscal 3Q16, Nordstrom opened three full-line stores, which included one full-line store in the US and two new stores in Canada. At the end of fiscal 3Q16, Nordstrom operated 118 full-line stores in the US and five full-line stores in Canada. At the end of the same quarter, TJX Companies (TJX) operated 3,785 off-price stores in the US, Canada, Europe, and Australia.

We’ll discuss Nordstrom’s earnings in the next part.

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