Fashion-focused department store Nordstrom Inc. took a hit during its first fiscal quarter ended May 2 as the retail chain’s stores temporarily shuttered due to the coronavirus pandemic.
Nordstrom, No. 18 in the Digital Commerce 360 Top 1000, says sales fell nearly 40% to $2.119 billion from $3.443 billion a year earlier.
Nordstrom’s digital sales grew 5%
However, digital was a bright spot for the merchant, as digital sales grew 5% to reach $1.1 billion. Online orders grew 9% year over year and, with its stores closed, the retailer grew its number of new ecommerce customers by more than 50% in the quarter. Additionally, digital accounted for 54% of total net sales, up from 31% a year earlier.
Digital sales are online sales and digitally assisted store sales, including online order pickup and ship to store. The increase in digital sales penetration for the first quarter was driven primarily by temporary store closures beginning on March 17 related to COVID-19, Nordstrom says.
The pandemic hit Nordstrom hard as store sales made up two-thirds of its business in 2019, the retailer says. Sales at its full-price department stores fell 36%, due to temporary store closures, and sales at its off-price Nordstrom Rack division were down 45%.
Nordstrom eyes on reopening stores
The retailer says about 40% of its stores are now open and expects the rest to be open by the end of June. Earlier this month, Nordstrom announced it will be permanently closing 16 of its department stores.
The retailer seems to be faring better than other department stores. Competitor Neiman Marcus, (No. 41) and lower-end department store chain J.C. Penney Co. Inc. (No. 32) have both filed for bankruptcy as a result of the pandemic.
Nordstrom has been able to reduce excess inventory by more than 26% by taking “aggressive actions” to “clear excess inventory through increased marketing and promotional activities.” That’s important so that the retailer isn’t stuck with excess out-of-season products and frees up store and warehouse space for new, in-season products.
The retailer posted a Q1 net loss of $521 million, which included after-tax charges of $173 million related to COVID-19, compared with net earnings of $37 million during the same period in fiscal 2019.
When it comes to customer engagement: more time means spending more money
When customers shop across more than one channel at Nordstrom, they spend four to 11 times more on average, CEO Erik Nordstrom said, according to an earnings call transcript obtained from Seeking Alpha. The retailer is offering contactless curbside pickup services at most of its full-line stores, he added.
“Our investments to connect our digital and physical experiences continue to serve us well, and the impact of COVID-19 is only emphasizing the importance of these capabilities,” Nordstrom said.
Nordstrom has been able to fulfill online orders from its full-price stores for more than a decade, and those stores fulfilled about 20% of online orders before the coronavirus became widespread. That percentage ramped up to 50% while stores were temporarily closed, Nordstrom said, and helped contribute to the reduction in inventory.
In mid-April, Nordstrom began fulfilling online orders from its discount stores as well. This move allowed NordstromRack.com to expand the merchandise its offers online to also includes its in-store inventory. After only a little over a month, about 25% of NordstromRack.com orders are being fulfilled from Rack stores, Nordstrom says.
Top-performing online merchandise categories during the pandemic include home, sleepwear and active apparel, while online sales have been down for men’s apparel, dresses, and designer apparel, executives said during the earnings call
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