Following Record $13 Billion+ Sales, Nordstrom Teases Free Two-Day Shipping

For Nordstrom, Inc., off-price and e-commerce are driving the business full speed ahead.

Reporting on Q4 2014 performance, the department store company noted that its Nordstrom Rack brand and e-commerce now combine for more than 40 percent of total sales, up from 30 percent three years ago. The company posted more than $13 billion in annual sales, growth of more than 7.8 percent, with comp stores sales growing 4 percent and ahead of expectations.

The company opened 27 new Rack locations in 2014, contributing to that channel's 17 percent growth. An additional 27 stores openings are planned for 2015 and 26 are on tap for 2016, as Nordstrom president Blake Nordstrom says the company sees a "clear path" to 300 Rack locations by 2020, with larger store formats driven by customer demand. The off-price channel is the company's biggest source of new customers, attracting close to 4 million new shoppers in 2014 with a brand mix that includes 48 of the full-price stores' top 50 labels. What's more, approximately one-third of Rack customers also shop in the full-line stores.

This past spring the company integrated its flash-sale business, HauteLook (which has grown 150 percent in three years), and, a move that further streamlined the customer experience and helped to drive about 1 million incremental store visits as shoppers returned web purchases to Rack locations, explains Nordstrom; 70 percent of HauteLook and Rack online purchases end up in stores. "The returns part is probably the easiest, biggest synergy subject for us to talk about when we talk about the synergies between our stores and online," he adds.

Moreover, Nordstrom continues, "when brands participate in dual-flash events, on and HauteLook, we've seen a lift in brand sales across all four channels."

Nordstrom, which landed the No. 14 spot on Fortune's World's Most Admired Companies list, continues to focus on key partnerships and new acquisitions. For example, Topshop remains a leading performer and a key attraction for new customers and will expand from 50 locations to more than 80 this year. The Trunk Club men's personal shopping business, which the company acquired in 2014, doubled its sales last year and is expected to double again this year, aided by "deeper integration" with the overall business, says Nordstrom.

A new distribution center under construction in Pennsylvania ahead of a planned fall opening will play a key role in Nordstrom's fulfillment strategy as it moves toward free two-day shipping. "Almost half of our customers are within a two-day ground delivery of that Pennsylvania fulfillment center," explains Nordstrom, "so a big chunk of our orders for both customers will be one to three days faster for them than currently is." The ultimate goal is for more than 90 percent of customers to be within two-day shipping coverage from the new facility and its existing Cedar Rapids DC.

Although delays at West Coast ports have dominated headlines for months, Nordstrom says the impact on its fourth-quarter business was "immaterial."

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