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Nordstrom CEO Erik Nordstrom, joins Yahoo Finance to discuss the supply chain and worker shortage, the company’s largest event of the year, and Nordstrom’s performance amid the pandemic.
ALEXIS CHRISTOFOROUS: Retail sales rebounded in June as consumers spent more on things like eating out and clothing. And that's good news for Nordstrom. The department store hopes shoppers will use its annual anniversary sale, its biggest deals event of the year, to restock their closets. Yahoo Finance's Brian Sozzi is going to go right to the source on this one. He's standing by with the CEO of Nordstrom. Hi, Brian.
BRIAN SOZZI: Hey, thanks so much, Alexis. Joining me now is Erik Nordstrom. Erik, good to see you again. It has been some time. I think the last time I saw you was actually in a store pre-pandemic. So good to see you here. So this is your biggest event of the year, the anniversary sale. How has the event started for you?
ERIK NORDSTROM: We're encouraged at the start. We're particularly excited just how the timing worked out. To your point, this is our biggest event. It long has been. And the origins of it was kind of two unique things. One was to pick and intentionally slow time of the year, it used to be called the dog days of summer. And the other part was to have something unique that it's not a clearance sale. It's not old merchandise marked down to clear out. It's brand new merchandise at savings. And then it gets marked back up after the event.
But the timing has just really fit with as the country's opening up and customers are looking to get out, get out in stores in particular, but are looking for something new, to travel, for back to school, back to work. You could just go on out to a restaurant where we're seeing a lot of interest and newness.
BRIAN SOZZI: So there are 100 new brands I believe this year versus last year. How have you curated the assortment differently given where we are in the pandemic?
ERIK NORDSTROM: Well, it's been hard. Category wise, our business through the pandemic has had swings of such a degree that I've never seen before in all my years. Obviously when pandemic hit and people are at home. We weren't still out of men suits, or high heel shoes, or dresses. And we ramped up our active business, our home business, or skin care business. And those, I don't know, you can call them COVID categories, continued to do well. But through the spring, we've seen a real resurgence in categories that are really big categories for us but are more about not doing calls like this that are doing-- for going out, for being with each other, and I guess in particular below the Zoom line here that people were actually wearing pants.
BRIAN SOZZI: Yeah, well I'm not going to comment to you, Erik, what I am wearing. But for all intents and purposes, I do have a suit on here. Full and fair disclosure, I was in one of your stores last week in Long Island, New York. And really I almost got ran over. The crowds were strong and almost had a holiday season type of feel. And there were a lot out of stocks. I mean that's a high class problem to have. But given the supply chain challenges retail is having right now, can you get goods replenished as fast as you would like?
ERIK NORDSTROM: That's hard. There's no doubt a lot of challenges on the supply chain. And there has been going back to last fall. So the answer is no. We don't get everything as quickly as we'd like. We knew some of that. We brought some merchandise in early. But I think the anniversary sale for most of our categories, we have to commit six to nine months in advance. And while we thought things would open up this year, traffic has rebounded faster, and demand has come back stronger than we had planned on it at the beginning of the year.
So there are some supply chain challenges for specific items, some categories are more than others. But we've been dealing with that for a while and are getting better at mitigating that.
BRIAN SOZZI: How has your team been able to overcome inflation?
ERIK NORDSTROM: Well it starts with top line. If you get a healthy top line, we can make some adjustments after that. So getting the top line going or towards the end of our Q2. But you go to our Q1 results we've had [INAUDIBLE] good sequential improvements to top line. And that allows us to more effectively address such subjects on the P&L. It's really on the merchandise side of work with our vendors, and we hadn't seen a lot of price increases yet. But we anticipate more of that coming and work with other vendors on those cost of goods as part of it.
We really looked at the pandemic as certainly a crisis, but a crisis not to waste. And in particular for us, there's been these several years trends of, I think it's accurate to call more things digital, the business becoming more digital. COVID was a massive acceleration in that direction. And we really looked to take advantage of that crisis mentality to pivot quickly and accelerate our transformation to a digital company, which is taking a lot of fixed costs out of the business.
So our model today, we can reach the same levels of profitability with a billion dollars less in sales than we had pre-pandemic. And we have a much more variable model and our model is much more geared towards in terms of digital first mindset.
BRIAN SOZZI: What stores are performing the best? I imagine the flagship stores in the major metro markets. Look, I mean I'm in New York City. I see the traffic's still slow. No real international tourism. What stores are doing better than others?
ERIK NORDSTROM: It's been a continuation through the pandemic. The best stores have been the more outlying stores. And the tougher stores have been those that are more densely populated, to your point, our downtown stores, stores where a big part of the traffic is a combination of tourism and office workers. Both of those are still lagging a bit. So and those are big stores for us. So they're coming back. We had our traffic rate of increase in our New York store was, it's been about 5x over the last couple of months, but the growth we've seen elsewhere.
So it's starting to come back. But I think it's going to be fall when school's back in session and people are starting to return to work that those downtowns really start to get to where they were before pre-pandemic. But they're heading in the right direction. And again, more outlying stores that are closer to where people live and have been working too, those have had better traffic for the pandemic.
BRIAN SOZZI: I mean, so encouraging start to the anniversary sale. That is certainly good to hear. Have you been able to get the quantity of workers that you've wanted to just to service this influx in demand? The shortage of retail workers, it's not getting any better.
ERIK NORDSTROM: No. Yeah, that's a big issue for everyone. I was just with a bunch of other retailers in Washington, DC the last couple of days. And supply chain and labor shortage is dominant subjects of the day. I think it helped us having anniversary. We could see it coming. It wasn't really to responding to traffic. It was this big event. And we started earlier in hiring. We did adjust wages. We've raised wages all across our store positions. And we did see improved applicant flow after raising some wages.
So but we've had to work really hard. Reached out to people who may have worked for us before and be more open to part time work. There's all sorts of levers we can pull. So I would say it continues to be a challenge. We still have a number of openings. But we're in much better shape today than we were a month ago.
BRIAN SOZZI: Erik, before I let you go, your family's name is on the outside of the store. It's on the corporate name. It's very much still, in many respects, a family run business. What are some of the biggest challenges you and your family have dealt with during the pandemic? And what have you learned? And what are you going to apply coming out the other side of the pandemic?
ERIK NORDSTROM: Well, I guess I would say a couple things. We're a public company. And we have a independent board of directors. And our family owns about 30% of the company. So it's and I say that because a great thing of being a public company is the scoreboard's very clear. And it's the same for us. We are looking to drive shareholder value. We believe we drive shareholder value by taking care of all our stakeholders. And through the pandemic, that I think has become more clear of the role in one, taking care of your employees and keeping them safe.
The role of your communities, of being a good corporate citizen, and in times that are crisis the role we have to play there. And yeah, I think for my brother Pete and cousin Jamie, there's a natural-- our personal reputations are very tied to the company's reputation. And when you go through the turmoil that this country's been through in the last year plus, and it was new for all of us, I think all businesses were in uncharted territory, being concerned about your reputation and not having a historical guidance, but really just trying to do the right thing.
And we get it wrong plenty. I would say that. But I would say that-- and it's not just us. I mean, people who work here take a lot of pride in where they work and wanting to work for a place that is trying to do the right things and is leaving things better than they found it. So that's really guided us through these tough times.
BRIAN SOZZI: Well it's good to see you all coming out the other side of the pandemic. I thank you for being in stock with my new necklace. I needed a treat for myself. It's been a long few months. We'll leave it there. Nordstrom's CEO Erik Nordstrom, always good to see you. Stay safe. I'll talk to you soon.
ERIK NORDSTROM: Thanks. Good to see you. Appreciate it.