Nordstrom wants off-price chain Rack to lead it out of sales slump

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Nordstrom wants off-price chain Rack to lead it out of sales slump
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The department store operator is opening 20 Nordstrom Rack stores and zeroing in on best-selling brands.

Nordstrom will offer updates about its turnaround strategy when it reports earnings on May 31.Nordstrom Rack, a brand that caters to bargain-hunting fashionistas, was founded in 1973. As the department store retailer has closed some full-line stores, it has opened more of the off-price locations.

Nordstrom Rack stores accounted for more than 40% of new customers in 2022, CEO Erik Nordstrom said on the March earnings callThe stores are also a way to move merchandise out of its full-line business, but still sell it in a profitable way, Jamie Nordstrom said. Rack also buys from brands' closeout sales.Nordstrom has turned Rack stores into e-commerce hubs, too.

She dubbed 2023 as off-price's "golden moment" because many retailers and brands got stuck with a lot of extra inventory. Sophisticated buyers can get good merchandise for less.Yih added that Rack doesn't have the same breadth as off-price competitors, which have large categories like home goods and food. Plus, Nordstrom risks stealing sales away from its namesake business, she said.

Sales performance is stronger at the company's three newest Rack stores, Chief Brand Officer Pete Nordstrom told investors on the March call. He called that a "proof point" that when brands are hot and merchandise is fresh, shoppers respond.

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