Retail

Nordstrom Turns To Discount Division As Traffic Wanes

Nordstrom is looking to reinvigorate its discount chain. According to news from Bloomberg, as foot traffic to malls has declined in 2017, same-store sales have likewise slowed at Nordstrom Rack, which is responsible for nearly a third of the company’s revenue.

Two-thirds of customers shop for discounted merchandise, according to a 2016 NPD Group study. Bloomberg stated that, last quarter, Nordstrom’s off-price retail division recorded $1.2 billion in net sales, with Nordstrom Rack responsible for $990 million of that revenue.

“They’ve got a good website and then they’ve got the brand name, which means something,” said Bridget Weishaar, an analyst at Morningstar. “This is a really valuable asset they bring to the table.”

The person in charge of reviving Nordstrom Rack’s brick-and-mortar locations is executive Karen McKibbin. She is opening the chain’s newest store this week in New York, which features gender-neutral fitting rooms and mobile checkout. The retailer’s intent is to make convenience a core component of the brand.

“We’re doubled down on speed and experience,” McKibbin said in an interview. “We really see it as complementary.”

The off-price format brought 6 million new shoppers to Nordstrom in 2016, Bloomberg stated, but the retail chain has competition in the space.

“Shoppers are savvier than ever and understand how to find value in the off-price game,” said Edward Yruma, an analyst at KeyBanc Capital Markets.“You’re in a spot now where the secular growth for off-price isn’t as favorable as it once was; it’s more hand-to-hand combat. It feels like a great value the first time you buy it, but if you keep seeing it, maybe that sense of urgency is a little dampened.”

This news comes after the company’s efforts to go private were dashed by lenders. Nordstrom shares have fallen 12 percent this year; before going private becomes an option again, the retailer must improve its performance.

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