Nordstrom's Sales are Slumping, Continues to Invest in Technology and Expansion

While not quite a four-alarm emergency, Nordstrom's sales are slumping. For the past couple of years the department store chain has enjoyed healthy mid-single-digit comp increases as it invested in new business units designed to connect with a greater percentage of the shopping public. The investments continue to be made, but the comp numbers have taken a major step backward.

The retailer's recently released Q3 2015 sales numbers show just a .9% increase in comp sales, signifying a significant drop in same store sales. Total sales still enjoyed a 6.6% increase, but that was well below the company's expectations and not as true a barometer of financial strength as comp sales.             
Nordstrom executives are not pointing to any one segment of the business for the downturn, only saying that the downturn is consistent across the retailer's many categories.  
"We're not economists, we're merchants," co-president and director Blake Nordstrom said during a recent earnings call with analysts and investors. "If you get to a higher altitude and you look at the scorecard, there are a number of economic indicators that look real positive for U.S. and the consumer and spending yet all we can tell you is in our business, we saw a slowdown. And it was across the board. It wasn't regionally or a merchandise region or a channel. We saw, compared to our plans, a very similar reduction again across the board and it went for the whole quarter."

Nordstrom has been in investment mode recently. The chain is coming up on the one-year anniversary of it Trunk Club acquisition and in Q4 invested in Australian-based startup Shoes of Prey. Nordstrom was part of a syndicate of investors - including Blue Sky Venture Capital, Greycroft Partners and Khosla Ventures. - who invested $15.5 million in the enterprise that offers full customization, allowing shoppers to design their own shoes online. In addition, Nordstrom has set up physical design studios in six of its locations and a digital experience on

In addition, the retailer continues to invest in technology to greater connected with its current and prospective shoppers. "In terms of anything we're looking at, going forward, the areas that we're seeing the biggest growth in outsized investment are in technology, in our fulfillment and in our online marketing," CFO and EVP Michael G. Koppel said. "We have a lot of resources available to us whether it's online marketing, whether it's more traditional forms of marketing that drive traffic. That being said, we also evaluate what's the value of that last dollar spent and its ability to drive more business and we look at that very closely as well."
One investment that is paying off big time for the chain is its continued expansion of its off-price brand Nordstrom Rack. In Q3 Nordstrom's off-price business including its online and physical Rack stores increased sales 12% and saw a 2.4% comp increase. As the retailer continues to gain market share in the off-price segment it is increasing its investment, opening 16 new Rack stores in the quarter to bring its total physical footprint to 194 locations.
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