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Nordstrom and Rack recovering as sales surge and shoppers return

UPDATED: Wed., May 25, 2022

Nordstrom's flagship store in downtown Seattle on Wednesday Aug. 14, 2019.  (Tribune News Service)
Nordstrom's flagship store in downtown Seattle on Wednesday Aug. 14, 2019. (Tribune News Service)
Renata Geraldo Seattle Times

The return of in-person events and on-site work led to a sales boom for Nordstrom as it recovers from a pandemic rut, the retail giant said during an earnings call with investors Tuesday.

Nordstrom’s sales grew 19% in the first quarter of the year, compared to the same time in 2021. Nordstrom Rack, the Seattle-based company’s discount chain that had been struggling financially, also saw stronger sales because of the return of in-person shopping and a larger assortment of merchandise.

The increase in brands available at Nordstrom Rack is a big driver of its recovery, though it’s “not back all the way,” Chief Executive Erik Nordstrom said. He also said the Rack is grappling with supply-chain issues.

“There’s still a lot of bumpiness out there in the supply chain. We’re certainly not immune to that,” he said.

Rack’s sales went above the sales forecast by investor firm Morningstar. It “recorded 10.3% sales growth, just above our 9.5% forecast as management places a higher priority on improving off-price product selection,” a reference to lower-priced and discounted items sold at Rack stores, according to a note from Morningstar analyst David Swartz.

Nordstrom had said last fall that it was “not satisfied at all” with the Rack’s recovery from the pandemic.

The company has 146 more Rack stores than regular Nordstrom stores, but Nordstrom’s 95 mainline stores and online market account for most of the company’s net sales and drive the most growth. For both brick-and-mortar and websites, Nordstrom’s sales were $2.29 billion. Sales for the Rack business were $1.18 billion. Total sales and credit card revenue for the company was $3.57 billion.

The increase in sales comes as retail spending is increasing. The U.S. Commerce Department reported retail sales increased 0.9% in April 2022.

While other retailers such as Target and Walmart reported higher sales but even higher costs, Nordstrom told investors inflation and cost increases did not dissuade shoppers.

“To date, we haven’t seen an adverse impact on customer spending from inflationary pressures, which we suspect is due to the higher-income profile of our customer base,” Chief Financial Officer Anne Bramman said in a statement.

At the same time, Nordstrom’s overall costs rose about 15% compared to the same quarter last year. During the call, Bramman cited the higher costs of transporting merchandise.

In the third quarter of 2021, Nordstrom’s shares plunged after it said higher costs and inventory issues affected sales.

Bramman said in-person shopping drove sales growth. Nordstrom also said its online business remained about the same compared to in-person shopping, despite being a big source of sales growth in the fourth quarter of last year.

Nordstrom’s Manhattan flagship store, which opened in 2019, had the highest sales in the chain, Nordstrom said. The company did not disclose the performance of its stores in Canada.

Nordstrom shares rose 11.9% in early afternoon trading Friday to $23.13 a share.

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