Nordstrom eyes boost to distribution hubs
The Seattle retailer narrowly missed Wall Street’s expectations, however, sending its stock down in after-hours trading.
Seattle Times business reporter
Taking a page out of Amazon.com’s playbook, Nordstrom indicated Thursday that it plans to expand its distribution network to keep up with growth in its e-commerce business.
Nordstrom Chief Financial Officer Mike Koppel said a larger distribution network is needed to speed up deliveries of online orders.
“We’re going to have to have more fulfillment centers as we push more product to our supply chain,” Koppel told analysts in an earnings call. “We want fulfillment closer to our customers.”
Neither Koppel nor spokesman Colin Johnson would give details about the planned expansion. But Johnson noted the expansion also could include more online orders filled at Nordstrom stores and other locations.
Seattle-based Nordstrom currently has a warehouse in Cedar Rapids, Iowa, to handle Internet orders.
Over the past year, Nordstrom has increased its spending on new technology, broader selection online, and employees with e-commerce expertise to secure its future.
Koppel suggested it won’t be letting up anytime soon, prompting a series of questions about the bottom-line impact over the next few quarters.
“We’re in a period where there’s a tremendous amount of change and evolution in the way that technology affects the customer experience,” he said. “We want to be an exemplar there, and we’re going to continue to invest to ensure that we don’t lose that status.”
Nordstrom reported a 15 percent increase in its third-quarter profit Thursday, but it fell short of Wall Street’s expectations, and the stock dropped in after-hours trading.
The company posted a profit of $146 million, or 71 cents a share, up from $127 million, or 59 cents, a year ago. Analysts predicted a per-share profit of 72 cents.
Total sales, including credit-card revenue, rose 13 percent to $2.8 billion.
Nordstrom’s direct-to-consumer business saw third-quarter sales growth accelerate to 38 percent, up from a 33 percent gain a year ago.
President Blake Nordstrom mentioned that the acceleration was ”achieved while going up against last year’s launch at the end of August of free shipping and returns online.”
Before Thursday, Nordstrom had met or exceeded Wall Street’s profit estimates in seven of the previous eight quarters.
But its stock has come under pressure amid investor concerns about new expenditures on technology upgrades and an expansion of the Nordstrom Rack discount-store chain.
Shares closed Thursday down 3.2 percent to $55.40, then declined 2.5 percent to $54.00 in extended trading after the results.
“Nordstrom tends to invest for the long-term,” said analyst Liz Dunn, of Macquarie Capital in New York. “Wall Street wants growth right now.”
Seattle-based Amazon, which last month posted its first quarterly loss since 2003, also is expanding its distribution network to be closer to major markets and speed up deliveries.
The world’s largest Internet retailer has announced plans for at least eight new U.S. distribution centers this year, adding to the 34 it operated at the end of 2011.
Blake Nordstrom, speaking before a local business gathering Wednesday at Bellevue’s Meydenbauer Center, noted that Wall Street tends to give Amazon more leeway in reinvesting back into the business.
A day after it reported a third-quarter loss of $274 million, Amazon’s stock jumped 7 percent to $238.24. Amazon shares closed Thursday down 2 percent to $227.35.
“They’re thinking 30 years down the road, and we’re being asked to look from a quarterly view,” Blake Nordstrom said.
Looking ahead, Nordstrom predicts a full-year profit of $3.45 to $3.50 a share, up from its previous guidance of $3.40 to $3.50. It also boosted the low end of its same-store sales forecast by a half-percentage point.
The company now projects an increase of between 6.5 percent and 7 percent in sales at stores open more than a year.
Nordstrom recently announced plans to double its Rack chain to more than 230 stores by the end of 2016, up from 119 today. (It opened a new Rack this week at Northgate Mall in Seattle.)
Nordstrom also has said it will expand to Canada with four large stores in Calgary, Ottawa, Toronto and Vancouver.
Blake Nordstrom said Canada has the potential for seven to nine full-scale stores, “as well as a number of Racks.”
Amy Martinez: 206-464-2923 or firstname.lastname@example.org