Why Nordstrom CEO’s Motto for 2023 Is to ‘Embrace’ the Uncertainty

Nordstrom is heading into 2023 with an optimistic motto: Embrace the volatility.

“As we look to 2023, there’s a lot of uncertainty,” said Nordstrom CEO Erik Nordstrom in a presentation at the Morgan Stanley Global Consumer & Retail Conference on Tuesday. “Our response is really to be as agile as possible.”

For Nordstrom, agility has been especially necessary this financial year, coming off a Q2 characterized by a softness in demand across the business that has persisted. In Q3, Nordstrom reported total revenues of $3.5 billion in Q3, down 2.9% from the same time last year. Net loss was $20 million, or $0.13 loss per diluted share. Adjusted earnings per share were $0.20.

To manage the changes, Nordstrom pivoted to cut costs and reduce inventory.

Despite the rough economic environment, there have been some wins for the department store retailer as well. Last quarter, Nordstrom benefited from a shift to occasion and event wear, as more people attend in person dinners, weddings and work events. Encouraged by the strength in those categories, Nordstrom said he is still cautious and emphasized the need for the company to increase its “agility” to be able to pivot and respond to shifting consumer trends.

“The change in category performance over the last 18 months has been unlike anything I’ve seen,” Nordstrom said. For example, while home and active wear were hot throughout the pandemic, fashion brands are making a comeback. Across the industry, fashion shoe sales in Q3 were up 7% to $3.5 billion, according to quarterly data from The NPD Group’s Retail Tracking Service, which excludes DTC sales. By comparison leisure footwear sales were flat in Q3 at $5.2 billion and performance footwear was down 6% at $2.1 billion.

“I think you’ve seen excess supply of a lot of those pandemic-hot categories in the industry that people are looking to clear through,” Mr. Nordstrom said.

Nordstrom is also exploring alternate forms of inventory ownership to increase its ability to get products to consumers more quickly, such as drop shipping. This access to inventory is crucial for Nordstrom’s goal to remain agile.

But despite measures to prepare for new challenges, Mr. Nordstrom knows it’s futile to attempt to predict the future. The key, he said, is to “embrace” this uncertainty.

“I could sit here and tell you what I think with all the confidence of my many decades in the business of how customers are going to be next year and future years and what retail is going to be like in 10 years and I’d be wrong,” he said. “I think that volatility and having to be agile has been a big lesson for me.”

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