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Nordstrom on Expansion Spree, to Open Two Local Service Hubs

Zacks Equity Research

Nordstrom, Inc. JWN has been consistently focusing on its store-expansion strategy as part of its efforts to enhance customer experience and expand market share. In this regard, it is imperative to mention that the company recently announced the launch of two Local neighborhood service hubs in New York City this fall.

The store that will be located at The Greenwich Lane property in the West Village will be about 2,400 square feet, while the outlet at the Upper East Side will be roughly 2,000 square feet. Notably, Nordstrom’s Local Concept is its first modern retailing store that does not stock merchandise. In fact, it is quite different from the traditional retail approach and is a neighborhood store, which should cater to the needs of the customers in a better way as it is centrally located. These neighborhood hubs form part of the company’s local market strategy, offering a seamless customer experience with exclusive services and design aesthetics.

Nordstrom introduced its first Nordstrom Local store at Melrose Place in West Hollywood, CA, in October 2017.

The local stores in the New York City will offer personal styling along with buy online, pick-up in-store, alterations and same-day delivery services. These will also feature flexible models and floor plans to resonate well with the changing customer preferences. In a bid to better interact with customers’ valuable requirements, Nordstrom will partner with customers in neighborhood.

Opening of new stores is not only expected to attract customers but also boost the company’s top line. Nordstrom has also been progressing well with expansion in Canada by opening six Rack stores in fiscal 2018. Overall, the company envisions a $1 billion sales opportunity from its expansion in Canada by 2020, including six planned full-line stores and 15 Rack stores.

Furthermore, management remains keen on domestic store expansion. Apparently, the company introduced men’s store in New York City and remains on track to open women’s store in October 2019. We expect these stores along with the aforementioned local hubs to drive this Zacks Rank #2 (Buy) company’s sales and profitability.

The store-expansion strategy apart, Nordstrom’s focus on advancing in the technology space by boosting e-commerce and digital networks, and improving its supply-chain channels and marketing efforts is encouraging. In fiscal 2018, digital sales improved 16%, representing about 30% of sales growth. Further, its generational investments contributed roughly $2 billion to sales growth and surpassed the company’s bottom-line expectation.

In fiscal 2019, management expects generational investments to contribute roughly $2.2 billion to sales.

Price Performance

In the past three months, shares of the company have lost 13.2% compared with the industry’s 0.9% decline.

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