Ever since Nordstrom launched its Rack concept, the retailer has maintained that its flagship department stores needn’t worry about cannibalization from the off-price format. While management continues to hold this view, quarterly reports make clear that Rack’s business is growing while the company’s department stores are not.
During the second quarter, comp sales of Nordstrom Rack and nordstromrack.com increased 5.3 percent while the company’s full-price off and online businesses declined 2.3 percent.
Nordstrom currently operates 121 department stores in the U.S., Canada, and Puerto Rico as well as 200 Rack locations. Plans call for the retailer to add 15 more Rack stores this year with a goal of having roughly 300 operating in the U.S. and Canada by 2020.
To be sure, Nordstrom’s full-line business still accounts for more than 70 percent of the company’s total, but the company’s Rack unit continues to grab a greater share of the whole.
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On the earnings call, Mr. Nordstrom described the Rack business as being “a more consistent business the last couple of years than the full-line stores” while also suggesting full-line has shown improvement that the company expects to continue building on.
Michael Koppel, Nordstrom CFO, added that Rack’s numbers have also benefited as a result of the off-price division’s e-commerce site. This, he offered, has skewed the comparisons between Rack’s growth versus the performance of Nordstrom’s full-price stores and websites.
“You have to look at the relative maturity of the online channel in the full-price sector versus the off-price,” said Mr. Koppel. “And we’re one of the few that actually have an online offering off-price. Most off-price is done in-store.”
Date: August 15, 2016