August 12, 2011, 4:38 PM

Nordstrom will spend heavily to secure its e-commerce future

Nordstrom will spend up to 15% of its capital budget on new technology through 2016.

Mark Brohan

Research Director

Lead Photo

Nordstrom Inc. sees e-commerce playing a big role in its future. The upscale department store chain, which in February acquired private event sales site HauteLook.com for about $180 million, also will spend heavily to secure that future.

Over the next five years, Nordstrom, No. 34 in the Internet Retailer Top 500 Guide, will spend about 15%—$375 million—of its planned capital expenditure budget of $2.5 billion on better technology, primarily for e-commerce, chief financial officer Michael Koppel told Wall Street analysts on Nordstrom’s recent second quarter earnings call. “A total of 15% of this plan is allocated to technology investments,” said Koppel. “Unlike investments in store expansion, investments to improve e-commerce tend to impact the profit and loss numbers quicker than store projects because of the larger portion expensed versus capitalized.”

Nordstrom will continue to invest heavily in e-commerce and mobile commerce because the Internet is the retailer’s fastest-growing channel, Koppel told analysts. The web and e-commerce also represent the changing nature of how consumers want to shop Nordstrom, the retailer says. “Direct is our fastest-growing part of the business, which is reflective of how customers increasingly want to shop,” president Blake Nordstrom told analysts. “A significant amount of future growth will come from online. Our strong capital position allows us to make the necessary investments to stay relevant with our customers.”

To diversify its e-commerce future—and become a bigger player in the private event sales space—Nordstrom acquired HauteLook.com with a goal of giving upscale shoppers more ways to purchase luxury and name brands online. Between a recent update to its mobile commerce site and ongoing improvements to Nordstrom.com, the retailer is also looking to develop a more personalized shopping experience for each customer, Jamie Nordstrom, president of Nordstrom Direct, told Wall Street analysts.

The web is also driving a big increase in new shoppers to the Nordstrom brand, the company says. “One-third of all new Nordstrom customers come through our web site,” Jamie Nordstrom said. “We think that over time, as the online channel becomes a larger portion of overall sales, it will become an even more important customer acquisition channel.”

Nordstrom has yet to break out its full quarterly earnings report. But for the second quarter ended July 30 Nordstrom reported:

  • Sales increased 12.5% to $2.7 billion from $2.4 billion in the second quarter of 2010. The company did not break out numbers for direct or e-commerce sales.
  • Net income increased year over year 19.9% to $175 million from $146 million.

 

 

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