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Yahoo Finance Presents: Anne Bramman

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Nordstrom CFO Anne Bramman sat down with Yahoo Finance’s Brian Sozzi to discuss the growth Nordstrom, its recent quarter, and the retail business at large as vaccine roll-out continues to counter the coronavirus.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: All right, joining me now is Anne Bramman, Nordstrom CFO. Anne, good to see you.

ANNE BRAMMAN: Thank you. You too. Thanks for having me.

BRIAN SOZZI: Of course. You are really just coming off your investor day. I know a lot of prep with that. Let's start with the outlook for this year. You called out-- looking for sales growth of 25%, EBIT positive. Or in other words, you're looking for operating profits, good things. What gets you to those numbers?

ANNE BRAMMAN: Yeah, Brian, so when we thought about '21, it clearly was still a lot of macro uncertainty as far as the roll out of a vaccine and when people really feel comfortable emerging from their homes. But what we looked at this was really a scenario planning approach to '21. And we thought we took a really pragmatic approach in some of the guidance that we gave.

Clearly, having the stores open is part of the assumption. As you remember, in 2020, a good portion of the first half, our stores were closed. So even just anniversary and that being open is driving a big piece of that growth piece to it. I think the other thing is it's really part of the journey of pivoting to growing market share, top-line growth, but more importantly, the commitment to having our operating profit grow faster than top line.

So we're seeing both of those things coming through in '21, as it's a transitional year for us.

BRIAN SOZZI: Anne, I'm trying to forget 2020, so we can't mention that. We can't mention that anymore. Why the confidence in the consumer coming back? You're not the first retailer that I've talked to of late that has expressed that confidence. Why is that confidence on your part?

ANNE BRAMMAN: Well, we're seeing sequential improvement in our trends, and we have since the second half of the year, when we saw stores reopen. And we're continuing to see that sequential improvement. We're seeing that people, at some point, are really, as they think about the vaccine, we've seen that people really are focused on what they're wearing outside of the home. And we're also seeing that that consumer is continuing to show appetite for shopping.

BRIAN SOZZI: Who is shopping your stores? Because I look at the-- I look at the stock market the past year. It's a tremendous run. And I think, wow, that's your customer. Is that who's coming into your store and buying stuff right now?

ANNE BRAMMAN: Well, I think the way we think about it is less about the channel, whether it's digital or stores, but really about the market. So we think our digital and physical assets are really a combination of serving the customer. So we-- we're pretty agnostic to how a customer stops us.

So when we think about this, we're seeing people shop both. They start out online and they come into stores, or they're in the stores and they're actually shopping online. I think what you heard from us yesterday is not only do we see a lot of momentum in our digital business. We see our digital business being 50%. It was in Q3. Will it be in Q4? And we expect that to happen in '21 and beyond.

But we're also seeing opportunities to expand our price point offerings in our Rack business. And what we're seeing is that it's a customer that's already underserved. It's another acquisition tool for our customers. But also we see about a third of our customers that shop our Nordstrom brand are already shopping the bargainista type or value play from a Rack perspective as well.

So we think it's a great synergy between both. People are shopping all of it.

BRIAN SOZZI: So as part of your investor day, you called out a focus right now on your top 20 markets, which represent 75% of your sales. That's about 250 stores. Why the focus, the outsized focus on these markets?

ANNE BRAMMAN: Well, again, when we go back and look at this from a market perspective, we launched this in LA a couple years ago. We rolled it to New York. And we've been rolling it out to our top 10 markets. And we're seeing outsized growth in those markets from customers, both in engagement, trips, share of wallet, and spend.

And so the more we're connected to our customer by offering both the digital and physical in that market, inventory available to them sooner, the services component to it for returns, alterations, styling services, we're actually seeing more engagement with the customers. And so we see that as an outsized improvement as we continue to go forward.

BRIAN SOZZI: What about the other 25% of the stores, the other about a hundred or so? Are those stores that you're reevaluating? They maybe no longer should be in your portfolio? We

ANNE BRAMMAN: We don't believe that's the case at all. We are really satisfied with our portfolio of physical assets. When we look at this, when the pandemic started-- I know we don't want to talk about 2020-- but when the pandemic started, we really took this as an opportunity to step back and think about our business.

So we already had seen the customer shifting to the digital side of things. We had always anticipated that our business would be about 50% digital at some point in time. It just got accelerated. And we also anticipated that our Rack business was going to be a bigger piece of our portfolio as well. It was a great opportunity for us.

So back in the early spring, we took a step back and said, OK, if this is going to be the case, how do we rationalize and think about the stores in a market? How do we think about serving these customers? And where do we lean in on investments and really accelerate coming out on the other side having that offering?

So the stores we closed-- we closed about 16 of our Nordstrom stores-- were really smaller stores in a market. They might have been the fifth or sixth store, older stores. So the way we approached it was really rationalizing the physical opportunity or physical assets in those markets. So the other markets that we're looking at we see are very valuable to us as well.

BRIAN SOZZI: So as part of your longer term outlook, you called out revenues up low single digits from the 2019 base, operating rev-- operating profit growing ahead of sales, EBIT margin 6%. In that revenue component, are you still opening up new full-price Nordstrom stores?

ANNE BRAMMAN: That's not really the biggest driver that we've called out in our investor event. So if you remember, the three drivers for us are, one, continuing our digital assets and our digital capabilities. Two was the Rack business. And three was continuing to roll out our market strategy and serving the customers in the market.

We really see those as the way to serve the customer. So it's less about opening stores-- our Nordstrom stores in malls, but really expanding on what we've got from a digital capability and our current visit up front.

BRIAN SOZZI: Now, besides preparing for investor days, Anne, you also sit on the board of McCormick. And what is the biggest challenge companies are up right now? Bring us inside the boardroom. This is 2020. Yeah, we don't want to think about it, but it's still very much top of mind. We're still dealing with a lot of the issues that we dealt with last year, COVID-19, trying to get an economic recovery. What are the biggest challenges right now inside the boardroom?

ANNE BRAMMAN: Well, you know, I can't say specifically about, you know, each company. But what I can say, at least from where I sit, even in Nordstrom, is, you know, there's just a lot of uncertainty out there in the macro environment-- how quickly a vaccine comes out, how quickly the markets recover, and how the customer and consumer is shifting. And this shifting is accelerating in that shifting as well.

So that's really, I think, across the board no matter what company you're looking at or what space. That's really what you're talking about.

BRIAN SOZZI: All right, we'll leave it there. Nordstrom CFO Anne Bramman, good to see you. Stay safe. And happy shopping.

ANNE BRAMMAN: Thank you. You too. Thank you. You too.