Anne Bramman has a clear idea of what’s behind the company’s longevity and its relative stability in a turbulent industry.
“The company has managed itself very conservatively, fiscally,” Bramman said. “In the last 120 years, it’s been through wars, depression, economic recession, a pandemic. So we take pride in making sure we can weather the storm out there. As a CFO, I really appreciate working for a company with that mindset.”
Being the CFO of a large public company — tracking the cash flow, dealing with Wall Street, guiding investments and financing, and advocating for corrective actions when necessary — is no easy role. “If you asked me a year ago what was most challenging, it was dealing with the pandemic when the stores were closed and we were trying to keep people employed and maintain cash liquidity,” Bramman said. “Right now, our cash flow and our balance sheet are in great shape.”
Nordstrom ended the second quarter with $1.3 billion in available liquidity, including $487 million in cash, and in July retired $500 million in notes due in October using cash on hand, reducing annualized interest by $20 million. Long-term debt is about $2.85 billion.
The retailer has forecast annual revenue to reach $17 billion in three to five years, compared with $15.13 billion in 2019, and $10.38 billion in 2020 when the pandemic hit. “There is still a lot of uncertainty and volatility, and the global supply chain environment is a great example of that. In an environment of volatility, it’s about making sure you’ve got scenarios you can adapt and that you can be agile — and that is exactly what I am focused on in this role. But it’s also ensuring that we live by the values of the company as well, and deliver a great customer experience.”
That’s where Nordstrom’s “Closer to You” three-year agenda comes in. Unveiled last February, it calls for broadening the digital assortment from 300,000 items to potentially 1.5 million in three to five years; injecting lower-price offerings into the Nordstrom Rack off-price matrix, and extending the reach and effectiveness of its three-year-old market strategy, which entails leveraging the physical assets of Nordstrom’s department stores, Rack locations and Nordstrom Local service hubs, to increase services, conveniences, merchandise choices and speed deliveries. “We are making progress” on the agenda, Bramman said. “There are definitely areas we are particularly happy with and other areas where we have more work to do.”
Nordstrom has begun building up its dot-com assortment to support the increasingly “digital first” orientation of the business. In 2020, digital sales accounted for about 50% of the company’s total revenues. “This year, it’s running a little under that given the recovery of our store business,” Bramman said. “We are still seeing good growth on the digital side, so we do anticipate that the majority of business will be digital in the next couple of years.”
With the goal of having 1.5 million SKUs in the dot-com assortment, she said, “We’re actually ahead of where we thought we would be at this point in time. Anniversary Sale was a great proof point for us. We really opened up on the offering from vendors.” More were added and many were drop shipping.
Asked what being digital-first implies for the future of brick-and-mortar stores, Bramman said, “It doesn’t mean we don’t value physical assets. They are incredibly important in serving our customers. They want to engage with us in multiple ways. We have 100 department stores today, primarily in A and A-plus malls, with some in downtown urban centers like Michigan Avenue [in Chicago] and Manhattan. We have really good locations. We continue to spend money refreshing them. As you know, we opened a huge store in New York, which was not a cheap prospect.”
She pointed out that stores have become more than places to shop. Store inventories are used to fulfill dot-com orders. Stores serve as centers for services such as BOPIS and returns, and elevating the services at stores leads to “more meaningful customer experiences,” Bramman said.
The exec characterized Nordstrom Local as another “engagement point” with customers and a convenient service alternative to going to a Nordstrom or Rack store that could be farther away. There are currently seven Nordstrom Local units: five in Los Angeles and two in Manhattan. Another opportunity centers on “getting more data-driven” and using predictive models to allocate the right inventory at the appropriate levels, market by market, to better meet customer demand and provide speedier deliveries, be it a next-day or two-day delivery. “That is really the piece of the strategy to unlock,” observed Bramman. At Rack’s 250 stores, about 70 have shifted to lower-priced merchandise to capture a customer shopping at TJX, Ross and Burlington. Prices at Rack are generally two to three times higher than the prices in other major off-price chains. “We’re getting more into that $10 to $15 price point for some Racks. We won’t do all 250 Rack stores” that way, Bramman explained.
Other Racks will continue with their high penetration of branded products. They share a lot of the same brands with Nordstrom’s full-line stores, but are sharply discounted. A third group of Racks will be “hybrids,” Bramman said, meaning they will have a mix of lower-priced goods and the branded goods.
Nordstrom raised its guidance for 2021 revenue growth of 35%, versus 25% previously forecast, and EBIT margin at 3% to 3.5% of sales, versus around 3% previously forecast. Net sales in the 2021 second quarter increased 101% to $3.57 billion, from $1.79 billion in the same period in fiscal 2020, and decreased 6% from the same period in fiscal 2019. “The consumer is spending. They’re coming back, even in markets with higher COVID-19 cases. People are socializing and want to refresh their wardrobes,” Bramman said.