Business

Nordstrom’s big annual sale is here, and the department store chain needs a boost now more than ever

A shopper leaves a Nordstrom store on May 26, 2021 in Chicago, Illinois.

Scott Olson | Getty Images

As Americans emerge from their homes and return to offices, weddings and college campuses, Nordstrom is betting they’ll require a brand new wardrobe.

In recent months, the department store chain tracked a 165% spike in searches for “work clothes” on its website. Nordstrom hopes shoppers will use its annual Anniversary Sale — its biggest deals event of the year — to restock their closets.

This week, Nordstrom kicked off its Anniversary Sale to members in its Nordy Club loyalty program. The deals on everything from AG denim to Charlotte Tilbury makeup to Dyson vacuums will open to the public on July 28 and run through Aug. 9. Nordstrom has been hosting its mega sale, typically during the summer months ahead of the back-to-school rush, since the 1960s.

But the stakes are much higher for this year’s event. Nordstrom knows it needs a boost to encourage stakeholders and analysts that its shops are still just as relevant to customers. Some may have lost faith, as the company’s quarterly sales have yet to return to pre-pandemic levels.

Nordstrom’s current outlook for fiscal 2021, calling for 25% growth from 2020 net sales of $10.36 billion, means revenue would still fall below the $15.13 billion it achieved in 2019. That’s also short of analyst expectations for a 28% increase, according to a Refinitiv survey.

“Every year, we think of the Anniversary Sale as the biggest thing that we do,” Jamie Nordstrom, president of stores at Nordstrom, told CNBC in an interview from the company’s flagship New York City location. “This year is special.”

“There’s an emergence from a pandemic, and this wardrobe refresh that is happening,” he explained. “The Anniversary Sale represents a really unique opportunity to serve that customer, really well.”

According to Nordstrom, more than 100 brands have been added to the company’s sales event this year that have never participated before. In addition to clothing, a variety of home goods will be marked down.

And Nordstrom’s loyalty members — who last year accounted for roughly 80% of purchases made during the deals event — have more time during this Anniversary Sale than they’ve ever had to shop early access before the public.

“They need a good Anniversary Sale,” said GlobalData Retail Managing Director Neil Saunders. “Because the numbers have not been great compared to others. They need this to boost the numbers, and to be able to tell investors things are getting better. They need to drive that narrative.”

“The hope is that this will be the start of the reset,” Saunders said.

Opportunity to grab market share

A preview on Nordstrom’s website in the days leading up to the event showed a variety of merchandise being discounted: Nordstrom lingerie pajamas on sale for $29 from $49; a Vince merino-wool cardigan on sale for $324.90 from $545; and Vince Camuto heeled sandals going for $79.90 from $130.

It was largely a mix of casual items, including leggings and sweat suits, along with work-appropriate and other dressier pieces.

Active wear is on display during Nordstrom’s annual Anniversary Sale event, at the company’s flagship store in New York City.

Source: Lauren Thomas

“This trend towards casualization is not stopping,” Jamie Nordstrom said. “It’s not like the pandemic is over and everybody is going to wear a wool suit again. That’s not happening. What we’re seeing is this trend toward casualization, but without sacrificing style.”

Steph Wissink, a managing director and retail analyst for Jefferies, has watched similar styling trends emerging among consumers in recent weeks.

“We’re easing back into fashion, with just a little bit of it edge,” she said. “It’s almost like a signal to the pandemic that we’re through with you. We’re ready to get back to normalcy. But we’re not ready to go back to what we were in before, because it wasn’t all that comfortable to begin with.”

If Nordstrom can offer shoppers this balance through its merchandise, Wissink said, the company should grab market share following a number of apparel retail bankruptcies in 2020, including some mall-based department stores.

Lord & Taylor, the oldest department store chain in the country, liquidated all of its stores after filing for bankruptcy last August. Neiman Marcus filed for Chapter 11 bankruptcy protection last May, emerging later in the year with fewer locations.

J.C. Penney has also shut more than 100 of its stores since filing for bankruptcy in May 2020. Penney has since emerged with new owners, the U.S. mall operator Simon Property Group and Brookfield Asset Management.

As more people return to malls and they’re met with fewer options, Nordstrom expects to pick up some of that lost business.

“People know Nordstrom is a destination for edge,” Wissink said. “That’s why the Anniversary Sale is so important, as a test, to see how far the fashion consumer is willing to go now.”

Nordstrom announced earlier in the week that it acquired a minority stake in four apparel brands — Topshop, Topman, Miss Selfridge and the activewear label HIIT — owned by the online U.K. fashion house Asos. It made the investment to better target consumers in their 20s with fast-fashion clothing.

Supply chain issues: ‘Everybody’s scrambling’

Despite the optimism, supply chain complications pose a challenge to Nordstrom’s Anniversary Sale this year. For much of the pandemic, retailers have experienced shipping backlogs that have delayed orders for weeks.

The delays have a variety of reasons. Manufacturing facilities were shut down in parts of South Asia, like Bangladesh, where Covid cases continue to rise and threaten workers’ well-being. Shortages of cargo containers and truck drivers have left goods sitting at ports. Orders that businesses thought were placed well in advance of meeting demand are suddenly not coming in soon enough.

Companies run the risk of not having enough goods, or the right goods, in stock. Jamie Nordstrom acknowledged that it’s something his company is still working through.

“There’s a handful of items that are on the [Anniversary Sale] event that we don’t have yet,” he told CNBC. “They’re getting offloaded on a ship right now.”

“So we see delays,” he added. “Everybody’s working as hard as they can — from the factory, to the shipping companies in Asia, to the ports. Everybody’s scrambling.”

Nordstrom has marked down a number of children’s clothing brands, in hopes that parents will use the Anniversary Sale to kickstart their back-to-school shopping.

Source: Lauren Thomas

When it reported its financials for the period ended May 1, Nordstrom said it pulled roughly $120 million of spring and summer inventory receipts up into the first quarter from the second, to try to stay ahead of consumer demand.

Nordstrom called out supply chain complications as one of the pressures that weighed on first-quarter earnings. It reported a loss of $166 million, or $1.05 per share, compared with a loss of $521 million, or $3.33 a share, a year earlier. 

“Retailers are anticipating this phenomenal demand, and therefore they’re scrambling to catch up with supply, because we’re in this odd circumstance where demand is outpacing supply,” said BMO Capital Markets analyst Simeon Siegel.

“The question that Nordstrom is going to have to now show is: Can Nordstrom capitalize on a greater willingness and ability [from consumers] to spend, and use their Anniversary Sale to catalyze purchases, but still do that at healthy margins?” Siegel added.

When retailers discount goods, it equates to fewer profits per sale. But Nordstrom can try to maintain profitability by marking down more of its private label (which is more profitable to begin with), and encouraging shoppers to fill their carts wit items from national brands at full price.

The right mix of promotional and full-price purchases during Nordstrom’s Anniversary Sale could put the business in a healthier position ahead of the 2021 holidays.

Nordstrom’s stock is up only about 7% year to date. Its market cap is about $5.3 billion, which has dipped below that of rival Macy’s, at $5.4 billion.

“The reset, in terms of fashion cycle, it’s obviously too late now for summer and spring,” said Saunders, the GlobalData Retail managing director, referring to Nordstrom’s struggle to get the right items in stock for the right season due to supply chain issues.

“It has to come in the fall and winter. So it’s going to be really interesting to see, once Nordstrom starts to clear out the summer stock, is fall merchandise in stores, or have they misjudged that season as well?”

View Article Origin Here

Related Articles

Back to top button