Nordstrom Unveils Plan to Expand Rack Sales by $2 Billion

(Bloomberg) -- Nordstrom Inc. announced plans to expand its product selection and improve its e-commerce reach as part of a strategy to win back customers -- and investors -- amid a slump that's been exacerbated by the global pandemic.

Nordstrom Rack is a central part of the growth plan, announced on Thursday ahead of a presentation to investors. The discount chain, where it will add more price points, is seen contributing about $2 billion in incremental sales over the long-term.

The strategy hinges on serving its biggest markets -- like New York and California -- with stores and improved distribution, while serving the rest of the country with e-commerce. Nordstrom, Which has spent recent years building its online presence, said its digital business will represent about half of total sales going forward.

The shares fell following the announcement -- a sign that Wall Street may have expected a more comprehensive overhaul from a company that has faced consistent sales declines in recent years.

Nordstrom's stock slumped 4.6% at 1:46 p.m. in New York, reversing an earlier gain. The shares had advanced about 17% this year through Wednesday's close. The company has seen its stock value decline for six consecutive years.

Financial Outlook

The Seattle-based retailer also laid out its long-term and fiscal 2021 outlook. The company sees revenue growing more than 25% in the current fiscal year. Longer-term, it sees that measure growing in the low single-digits annually from 2019 levels.

In a webcast, Chief Executive Officer Erik Nordstrom said the company is targeting $17 billion of annual revenue in the medium term. That compares with $15.9 billion in fiscal 2019. For instance, management is looking to triple its selection of home goods and grow that business significantly within the next several years.

Nordstrom is planning to grow its selection of products, particularly in what it calls “high-growth categories,” from just 300,000 choices now to more than 1.5 million items.

Nordstrom saw a pronounced decline in sales last year, with the company expected to report its fourth consecutive quarterly decline when it reports final results for the year. Last month, Nordstrom said sales fell 22% during the nine-week holiday period that ended on Jan. 2.

Manhattan Flagship

The global pandemic hit the economy shortly after Nordstrom inaugurated a new Manhattan flagship location -- a 320,000-square-foot store that opened in October of 2019. Executives have called the new location the biggest bet in Nordstrom history, which stretches back to the beginning of the 20th century.

The company's aim is to win over New Yorkers with a superior suite of services such as sneaker cleaning and digital kiosks for product returns -- a goal that's been hindered amid widespread store closures and lower store traffic.

The company is scheduled to report fourth-quarter earnings on March 2.

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