Nordstrom is becoming more and more like a discount store.
- Nordstrom reported an increase in same-store sales during the holidays.
- This growth was due, in part, to positive sales at its off-price store, Nordstrom Rack.
- These stores now outnumber Nordstrom's full-price stores in the US.
Nordstrom is turning into a discount retailer to boost sales.
This week, the luxury, century-old department store reported a 2.5% increase in same-store sales during the holiday period, thanks to strong sales at its off-price Nordstrom Rack stores.
Same-store sales at Nordstrom Rack stores increased 2.9% and its net sales were up 8.2%, while its full-price stores reported a more modest 1% increase in same-store sales.
Nordstrom has struggled recently. Same-store sales numbers have steadily declined since 2014 in its full-line stores. It has increasingly leaned on its off-price chain, Nordstrom Rack, for growth, and these off-price stores now outnumber Nordstrom's full-price locations. Given the success of Nordstrom Rack stores, it's likely we can expect to see more of them in the coming years.
We went to a Nordstrom Rack store in June last year to see if this truly is the future of the brand.
Nordstrom Rack is the off-price retail division of the luxury department store Nordstrom. It sells brands for between 30% and 70% off. We visited one of its stores in New York's Union Square on a sunny afternoon in July 2017. The store is one block away from a rival off-price retailer, Burlington.
While same-store sales in Nordstrom's department stores have slowed in the past three years, the off-price channel has seen more growth, especially online.
For this reason, the brand has been growing its off-price store locations: Nordstrom now operates 232 off-price stores in the US and 122 full-line stores.
Off-price shopping has become one of the only bright spots in retail. While department stores such as Macy's and JCPenney have shuttered stores, off-price retailers such as TJ Maxx and Ross Stores have announced plans to expand across the US.
Department stores have begun trying to mimic the off-price model in their own stores. Macy's, for example, has created its Backstage concept. This has created more competition in the space, despite Nordstrom being ahead of the curve here.
Morningstar analyst Bridget Weishaar told Business Insider that there is still more room for growth."I think their big asset is Nordstrom Rack," she said in June.
This Nordstrom Rack store felt a lot like a TJ Maxx.
However, prices did feel more expensive here. These Tommy Hilfiger Men's suit jackets were reduced from $400 but still had a hefty $189.97 price tag.
The layout was very similar, but it did feel more organized, especially in the self-service shoe section.
In the accessories section, jewelry hung from racks.
And all beauty products were self-service.
It was a lot less luxurious than one of Nordstrom's full-price department stores.
Customers can fill carts with products.
There were fewer attendants around to help and limited changing rooms, which created long lines.
And there were long lines to pay.
This area felt a lot like a grocery store.
Overall, the shopping experience at Nordstrom Rack was pretty pleasant. It's fun to sift through racks of products to find the real gems that are available. If Nordstrom can keep its selection fashionable and current in Rack stores, it's a good sign for the brand. It's a lot more appealing to shop here than at its full-price stores, where you are paying much higher prices for comparable products.
