Nordstrom Inc. will wind down its Canadian business in the next few months in what executives said Thursday is a bid to simplify operations and concentrate on its core U.S. market.
“Despite our team’s best efforts, including multiple initiatives to improve our outcomes, our Canadian business has not been profitable,” CEO Erik Nordstrom said Thursday afternoon during the company’s fourth quarter results call with analysts.
Nordstrom expanded into Canada in 2014, but has struggled to make money there. The pandemic added further strain on the business, with the CEO concluding there was “no realistic path to sustainable profitability” in Canada.
The company operates six Nordstrom and seven Nordstrom Rack stores in the country.
The Canadian e-commerce division ceased operations Thursday, with the physical stores to be closed by June.
Nordstrom executives now believe the retailer will be on firmer footing following its Canada decision and last year’s efforts to bring inventory levels down in line with 2019. The better positioning will help as retailers more broadly see continued pressures on consumer spending this year.
“We saw customers starting to pull back in late June, primarily in Nordstrom Rack, and this trend continued through the holiday season, across both banners,” Eric said. “The softening trend was more pronounced in customers with lower-income profiles. Given the uncertain environment, we are executing with agility.”
Inventory and Markdowns
Faster inventory turn is a focus for both of the company’s brands this year, according to President and Chief Brand Officer Pete Nordstrom.
“Looking forward, we have conservative buy plans in place consistent with our outlook for continued macroeconomic pressure on consumer spending,” Pete said. “We are also maintaining increased reserves against our buy plans, which enables us to be opportunistic in-season and we are planning for faster inventory turns with an increase of at least 10% over 2022 to drive newness and flow, while also increasing the return on our inventory investment.”
Markdowns increased for Nordstrom in the fourth quarter as the company sought to work down inventory levels, but the number of promotions is expected to normalize this year, according to Pete.
“We can’t control what’s going on with the other retailers and what their inventory position is,” Pete added. “And, at a certain level, we have to be responsive to that. So, we’ll see how that plays out. But, for now, we can tell you with a lot of confidence that we’re going to return to a more normal markdown cadence because our inventory’s in a much better position.”
Nordstrom Rack and Key Brands
Efforts to expand Nordstrom Rack also underpin the company’s growth initiatives this year.
The Rack business accounted for more than 40% of Nordstrom Inc.’s total new customer base in 2022, with executives seeing more opportunity to nab new shoppers through the off-price channel.
The company has plans to open 20 Rack stores this year to further expand the chain’s reach, even after the division’s net sales fell 8.1% in the fourth quarter. The decline was driven by several factors, including the company’s decision to stop online fulfillment out of stores and to increase the minimum purchase value required to receive free shipping to stores.
The company said it plans on prioritizing 100 of what Eric described as “nationally recognized strategic brands.”
“These brands are proven performers, many of which are not widely available in the off-price space,” Eric said.
Pete added the brands that will be prioritized have better average selling prices and monthly sell-through than other lines, and made up about half of Rack sales last year.
“With more open-to-buy and access to great brands, especially in the current environment, we are well positioned to deliver a more constant stream of newness and improve inventory flow,” Pete said.
Q4, Full Year
Nordstrom Inc. generated net sales in its fiscal fourth quarter of $4.2 billion, which was down 4.1% from the year-ago period. Declines were seen across the company’s two brands, in addition to the digital channel.
Nordstrom Inc.’s net earnings in the quarter narrowed to $119 million, compared to $200 million a year earlier.
The company ended the year with net sales up 5% to $15.1 billion. Net earnings for the year increased to $245 million from $178 million in 2021.
Nordstrom said it expects revenue to be down in the range of 4% to 6% for the current fiscal year. Earnings per share for the year are expected to be in the range of 20 cents to 80 cents.
