Can Nordstrom’s Revenue Improve in a Tough Retail Market?

Revenue growth

Nordstrom (JWN) delivered better top-line growth in the first half of fiscal 2017 compared to department stores like Macy’s (M), Kohl’s (KSS), and JCPenney (JCP). For the most recently reported quarter, fiscal 2Q17, Nordstrom’s revenue, which consists of retail sales and credit card revenue, rose 3.9% to $3.8 billion. However, this growth was mainly due to the company’s online channels and off-price Nordstrom Rack store sales. Sales from the company’s upscale Nordstrom full-line stores in the US continued to be under pressure in fiscal 2Q17 and fell 4.6% in fiscal 2Q17. In fiscal 2Q17, Macy’s and Kohl’s sales fell 5.4% and 0.9%, respectively, while JCPenney’s sales were up 1.5%.

Can Nordstrom’s Revenue Improve in a Tough Retail Market?

Growth strategy

In partnership with its vendors, Nordstrom is focused on providing new and attractive merchandise to its customers. Nordstrom’s merchandise includes popular brands like Topshop, Madewell, Brandy Melville, J. Crew, and Charlotte Tilbury.

The company continues to strengthen its store network. On September 15, the company announced the opening of its CF Sherway Gardens store in Toronto. With the opening of this sixth store in Canada, the company has completed its planned full-line store expansion in the country. Nordstrom opened its first full-line store in Canada in 2014. The company plans to open six Nordstrom Rack stores in Canada in 2018.

In the US market, Nordstrom opened six off-price Nordstrom Rack stores this spring. The company plans to open 11 additional stores this fall, bringing the total Rack store count to 232 by the end of fiscal 2017.

Nordstrom is also enhancing its online channels, which are a key sales growth driver for the company. In August, the company announced that it’s expanding its “Reserve Online & Try in Store” service from six stores to nearly 40 stores. The company will continue to expand this facility to more stores. According to Nordstrom, ~80% of customers who tried this service continued to use it.

We’ll discuss Nordstrom’s valuation in the next part of this series.