Nordstrom Grows Store Network

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Nordstrom Inc. (JWN), a leading Seattle-based fashion specialty retailer, announced plans to open two new Nordstrom Rack stores; one in hometown Seattle, Washington, and the other in El Paso, Texas.

Nordstrom’s new Rack store in Seattle will be positioned at the southeast corner of the Northgate Mall, where it already operates a full-line store. The company had opened its first store in the mall owned by Simon Property Group Inc. (SPG) way back in 1950, which was later converted to a full-line store in 1965. The Northgate mall also houses leading department stores like Macy's Inc. (M) and J.C. Penney Company Inc. (JCP).

Spread out in an area of 41,000 square foot, Nordstrom’s new Northgate showroom is expected to begin operation in November 2012. The store will mark the company’s sixth Rack store in Seattle, including the recently relocated store at Westlake Center, downtown Seattle.

Moving west, Nordstrom’s next Rack store announcement is planned to come up at The Fountains at Farah, a new power and lifestyle shopping mall in central El Paso. The mall being developed and managed by Centergy Retail LLC is currently under construction. The mall has been designed to accommodate over 600,000 square feet of retail and restaurant space as well as lifestyle shopping amenities. The company expects to start operating the 35,000 square foot showroom by the fall of 2013.

Nordstrom’s Rack stores generally offer merchandises that are in trend from Nordstrom stores and Nordstrom.com at a significantly reduced price to customers. Products at these stores are sold with discounts of roughly 50% to 60% from the original Nordstrom tags. Nordstrom Rack also carries a vast assortment of branded apparel, accessories and shoes that are available at Nordstrom stores, and are offered to customers with a discount of about 30% to 70%.

Nordstrom’s latest store openings signify its commitment to expanding stores network with the aim to drive its top-line growth. Nordstrom’s focus on store expansion is evident from its string of Rack stores openings in Orange, California; Salt Lake City, Utah; Huntington, New York and Upland, California, since the start of fiscal 2012.

In fiscal 2011, Nordstrom added 18 new stores, which contributed significantly to a 12.7% year-over-year growth in fiscal 2011 net sales. Moreover, Nordstrom plans to continue its store expansion strategy in fiscal 2012, targeting to open a total of 16 new stores, comprising 1 full-line store and 15 Rack stores.

Nordstrom currently maintains a Zacks #3 Rank, which translates into a short-term Hold rating. Our long-term recommendation on the stock remains Neutral.

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