Nordstrom is making the customer the center of its strategy as it focuses on creating a differentiated experience in each of its businesses, executives noted while delivering a strong second quarter report.
“While we’ve been pursuing distinct strategies to grow each business, we’re also working to link them together to provide our customers with a seamless experience,” Blake Nordstrom, co-president and director for Nordstrom, told analysts on an earnings call. “This is important because we know that when customers engage with us across multiple touchpoints, their lifetime value and spend increase significantly.”
Nordstrom’s sales increased 9.2% in the second quarter to $3.4 billion, the fourth consecutive quarter north of 9% topline growth. Same-store sales were up a healthy 4.9%.
Michael Koppel, CFO and executive vice president of Nordstrom, said income from the company’s two new Canadian stores, as well as from The Trunk Club and discount sites NordstromRack.com and HauteLook, brought in more than $100 million in extra revenue, representing about a third of the quarter’s sales growth.
He also said NordstromRack.com and HauteLook grew 50% in the first half of the year, putting them on track to reach $500 million by the end of the year. “The growth in our off-price business continues with Rack’s total sales increase of 13%, which represented 26 consecutive quarters of double-digit growth,” he said.
Koppel said Nordstrom has seen mid-single-digit comp increases over the past year in its combined full-line stores and Nordstrom.com businesses.
While the company is focused on integrating its online and offline businesses in order to meet customer needs when, where and how they want, its stores are still the main show.
“Our recent initiatives around stores and mobile, along with our Trunk Club acquisition, are ways to create a more relevant experience with our customer,” he said. “We consider full-line stores to be the core of our brand, providing our customers with a high level of service they expect from us. Not only are we serving more customers through new stores, we are benefiting from synergies across our channels.”
He highlighted the new Canadian stores as an example. “When we opened in Calgary and Ottawa, we saw a meaningful increase in online sales in those markets,” Nordstrom said. “With two stores open to date, our Canada business is performing ahead of plan. Next month, we will open our Vancouver flagship store with an elevated service offering. We plan to open three stores in Toronto over the next couple of years and introduce Racks in the fall of 2017.”
Nordstrom said the growth of Nordstrom Rack is an important element of its strategy to gain new customers and increase engagement across channels.
“The Rack business now represents our biggest source for our customers, attracting around $4 billion in 2014,” said Nordstrom. “It also serves as an entry point to the Nordstrom brand, providing opportunities for customers to cross-shop. He said in 2014, one million Rack customers started to shop at either its full-line stores or Nordstrom.com for the first time.
Nordstrom said mobile has provided convenience as customers are increasingly desire a seamless shopping experience. To evolve with changing customer expectations, Nordstrom is rolling out new features at a rate three times faster than last year. In addition to other mobile enhancements, it is launching a unique text-to-buy feature.
“As customers continue to want a more integrated shopping experience, we view mobile as a long-term priority to provide a richer experience for our customers,” said Nordstrom.
Nordstrom said from a merchandising perspective, the company is focused on integrating its business to provide customers with a differentiated offering.
“This is enabled by our vendor partnerships, where we can offer a one-stop-shop for distribution across channels and categories,” said Nordstrom. “Through these partnerships, we’ve been able to better serve customers by complementing our curation in store with greater breadth online.”
Nordstrom said the company’s continued investment in omnichannel fulfillment include a focus on increasing delivery speed. “This will be enabled by our third fulfillment center, which opens this month and will be fully operational by holiday,” he said. “The center is expected to increase our fulfillment capacity by over 50%, supporting our long-term growth.”