Nordstrom Inc. (JWN), one of the largest fashion specialty retailers in the U.S., plans to further expand its Rack concept by opening a new two-level store in Tysons Corner, Virginia. The store, scheduled to open in fall 2012, will include a wide selection of apparels, accessories and shoes of the Nordstrom Rack store.
The new store, spanning across 42,000 square feet, will share the floor with tenants such as Morton’s Restaurant Group Inc.‘s (MRT) Steakhouse, Bertucci’s restaurant and Bank of America Corporation (BAC). The new store will replace the former Filene’s Basement space and will be a part of 215,000 square-feet Tysons Corner Center, which is owned by Rocks Tysons Two LLC. The center is managed by Allen & Rocks Inc., while KLNB handles retail leasing.
The Nordstrom-Tyson Corner association goes back to 1988, when the company opened its first east coast full-line store in the center. The store has consistently been one of Nordstrom’s top performing stores. The company at present operates nine full-line stores in the Washington metropolitan area and this will be the ninth Nordstrom Rack store in the region.
Nordstrom Rack store is an off-price retail format of Nordstrom that sells the company’s off-season and clearance goods from its mall stores and Nordstrom.com, at a discount of 50-60% from original Nordstrom prices. Rack also showcases apparel, accessories and shoes, which are specially purchased for Nordstrom Rack at a discount of 30-70% on original prices. The Rack concept is specifically designed for customers who appreciate the brand but cannot afford it due to its higher pricing.
Nordstrom’s Sales Performance
Nordstrom remains focused on expanding its store network to drive top-line growth. The company’s December same-store sales grew by 8.7% compared with 8.4% in the five-week period ended January 1, 2011. The December results marked the 27th consecutive month of comparable store sales growth. Total retail sales climbed 12.7% to $1.57 billion from $1.39 billion for the five-week period ended January 1, 2011.
Moreover, Nordstrom’s year-to-date comparable sales grew by 7.3% year over year. Total retail sales for the period increased 12.7% to $9.81 billion from $8.70 billion reported in the prior-year period.
However, every retailer didn’t experience the same fate. Gap Inc. (GPS), which competes with Nordstrom, registered a decline of 4% in same-store sales in December 2011, while its net sales came in at $1.98 billion compared with $2.01 billion in the year-ago period.
Store Update
Based in Seattle, Nordstrom currently operates a network of 225 stores across 30 states, of which 117 are full-line stores, 104 Nordstrom Racks, two Jeffrey boutiques, one treasure&bond store and one clearance store.
Our Take
We believe that Nordstrom’s strategy of opening stores at key areas will boost its top line performance. However, a sluggish discretionary spending environment, intense competition and exposure to seasonal fluctuations keep us on the sidelines.
Currently, Nordstrom holds a Zacks #2 Rank, implying a short-term Buy rating. Besides, the company retains a long-term Neutral recommendation.
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