Could be Rack or ruin
N’strom needs offshoot
As Nordstrom has put its buyout plans on hold, the retailer is under intense pressure to find answers to the department-store slump.
Key to that effort is reviving what was once a longtime bright spot for the chain: Nordstrom Rack.
The discount stores have been helping the company cope with a slowdown at its full-price formats, but now they are in need of their own jump start. Same-store sales and traffic have stalled at Nordstrom Rack this year.
The job of shoring up Nordstrom Rack falls to longtime Nordstrom executive Karen McKibbin, who is debuting the chain’s latest store this week in New York City’s Herald Square neighborhood, just blocks from the iconic Macy’s.
The location features genderneutral fitting rooms and mobile checkout via an updated app — an attempt to make convenience a centerpiece of the brand.
“We’re doubled down on speed and experience,” McKibbin said in an interview. “We really see it as complementary.”
The 47,000-square-foot location, which sprawls over three floors, comes ahead of the crucial holiday shopping period and as department stores fight for a shrinking base of customers that are increasingly focused on value.
The company is reassessing its options after the controlling members of the Nordstrom family suspended efforts to take the company private as lenders sought interest rates that were about twice what similarly rated, non-retail businesses pay.
If the company wants to revive the idea of going private, improved performance will be needed. With foot traffic in malls and Nordstrom’s full-line department stores still declining, the burden may fall increasingly to Rack, which already generates about a third of the company’s revenue. Two-thirds of all consumers shop off-price, according to an NPD Group study released in 2016. Last quarter, the combined off-price division brought in almost $1.2 billion in net sales, $990 million of which came from Rack stores.
Part of Rack’s appeal is the designer brands it carries. The store sells 48 of Nordstrom’s 50 best-sell- ing brands, McKibbin said.
McKibbin said the company is taking a holistic view of off-price performance that includes multiple channels.
“We think there’s a lot of positive things taking place, like attracting new customers and opening our latest store in New York City,” she said.