Once High End Retailer Nordstrom’s (NYSE:JWN) Now a Discount Store
JW Nordstrom’s off-price Rack is thriving, its full-line stores still may have a way to go to fully enter the discount space.
In its Q-2, total comparable sales fell 1.2%.
It is important to look at the breakdown: comparable sales for its full-line business dropped 2.3%, but its off-price Rack store saw comparable sales in crease by 5.3%.
The company said the full-line stores decrease in sales was because of the shift in timing of its Anniversary Sale, what?
In other words: the most successful part of its brand is its off-price brand, not the part of its brand that holds its premiere positioning.
Nordstrom Rack stores have been proliferating widely.
They currently outnumber that of the company’s full line stores. There are 118 full-line stores in the United States and 3 in Canada, and there are 200 Rack stores already. Nordstrom plans to have 300 Rack stores by Y 2020.
However, as of last Quarter, sales for Nordstrom’s full-line store comprised 72% of the business, which represented the majority of sales, though that number was less than it has been.
The company acknowledged that Rack has been “more consistent” than its full-line Father.
It not not the only department store to be zeroing in on the discount business.
Macy’s (NYSE:M) has also been opening up off-price stores called Backstage, some even within its own stores, which has also been threatening its positioning.
This sends a message about a worrying consumer trend, read: they are increasingly frugal and they do not want to pay full price if they do not have to.
As more and more retailers resort to discount promotions to clear inventory and to bring in consumers as sales fall, consumers become conditioned to not paying a premium.
Pappagallo, or ‘fast fashion’ has not helped the cause, as it gives consumers the opportunity to pay less for stylish, runway-esque, throw away apparel. And the luxury handbag brands are steering away from department stores.
Coach (NYSE:COH) announced that it will remove itself from 25% of its wholesale locations.
Michael Kors (NYSE:KOR) has announced that it will no longer participating in department store couponing and friends and family discounts.
Both announced these actions following declines in wholesale net sales and as a means to keep their brand positioning alive and well, as department stores can have tendencies to promote heavily.
Nordstrom remains confident that it will be the department store that vendors will be confident about.
“What we’re trying to do is put ourselves in a real favorable position with vendors to be the retailer of choice for them, and what that means for most of the vendors we deal with is our desire, strong desire, to sell at full-price,” co-President Peter Nordstrom said on an earnings call.
|NYSE:JWN||51.38||12 August 2016||3.82||51||52.09||50.26||14,786,200|
|HeffX-LTN Analysis for JWN:||Overall||Short||Intermediate||Long|
|Bullish (0.39)||Bullish (0.48)||Bullish (0.31)||Bullish (0.39)|
Have a terrific weekend.
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