Nordstroms consumers tiptoe back into luxury

While sales have been strengthening at Nordstrom, executives from the Seattle-based retailer told a group of investors that one of the best lessons it learned in the recession was a savvier balance between its full-line Nordstrom stores and the Rack, its rapidly growing off-price division.

The company says it plans to keep opening between 10 and 15 Rack stores per year -- but, as growth picks up at Nordstrom, there is less inventory. "We've had Racks for 35 years, and it's a very profitable concept," Rob Campbell, head of investor relations, told those attending the 30th Piper Jaffray Consumer Conference on Wednesday. "It's worked well in both in tough times and good times."

As consumers tiptoe back into luxury spending, he said, "the Rack's performance has moderated in recent months. That's good news for Nordstrom, because it means we've become a lot more adept at clearing full-line merchandise in our main stores. And it's an opportunity for the Rack, which is going to have to tweak its offerings. That's the beauty of having a portfolio."

"We think this is an opportunity for us to learn how to use inventory more efficiently," added Michael G. Koppel, EVP/CFO, at the event, which was also webcast. "We're excited about figuring that out."

Koppel says the recession forced Nordstrom executives "to navigate some of the most difficult waters any of us have ever seen. The big lesson we learned is that everything we do is about how to better serve our customer. During the times when business was frothy, we made some changes. And during times when it got more difficult, our broad mix and assortment helped us get through that."

"We continue to be very thoughtful," he says. "We're still in a period of unemployment." Koppel adds that it isn't entirely clear whether its gains are a reaction to negative business last year or real growth, but that it should know within six months. The chain is seeing solid gains in women's and men's apparel, as well as accessories. "We believe we've got the right strategy and assortment, and the right approach to customer service."

In its first-quarter results released last month, Nordstrom's sales gained 16.7% to $1.99 billion, while same-store sales climbed 12%.

SOURCE: Media Post News