May 19, 2014, 12:50 PM

Nordstrom invests heavily in e-commerce

With web sales that grew 33% in the first quarter, Nordstrom says it plans to spend heavily on e-commerce improvements over the next five years.

Lead Photo

Nordstrom's web sales topped $400 million in Q1 2014.

E-commerce isn’t just growing at Nordstrom Inc., it’s growing dramatically with e-commerce sales up 33% in the first quarter.

With web sales accounting for even more of the chain’s overall growth, Nordstrom, No. 24 in the Internet Retailer 2014 Top 500 Guide will invest deeper resources into e-commerce and information technology upgrades, the retailer said on a recent earnings call.

“We plan to invest $3.9 billion in capital over the next five years as we focus on serving more customers through store and online growth,” said Mike Koppel, Nordstrom executive vice president and chief financial officer, on the earnings call. “An important element is our technology investments, which represent $1.2 billion or 30% of our capital plan, and approximately 40% of our technology capital relates to infrastructure to support our growth plans and to facilitate enterprise-wide synergies.”

A big part of future spending is growing Nordstrom’s fulfillment network for its direct sales channel. The technology capital plan includes systems to support merchandizing, Canadian Rack store growth and marketing, Koppel told analysts. “Another 40% is planned in support of our online growth, including expansion of our fulfillment network to increase speed of delivery and furthering our customers’ mobile and personalization experience. The remaining 20% is focused on increasing our relevance in stores with enhanced tools for our salespeople, such as our new texting platform and point-of-sales solutions.”

It was a busy first quarter for Nordstrom. For the quarter ended May 3, Nordstrom reported:

  • Direct sales increased 33%. Based on that metric Internet Retailer estimates direct sales increased to $400.2 million from $301.0 million in the first quarter of 2013. Nordstrom broke out the first quarter 2013 number in its financial filing for that period.
  • Total sales grew year over year 6.8% to $2.83 billion from $2.65 billion.
  • Comparable-store sales increased 3.3%.
  • Net earnings decreased 3.4% to $140.0 million from $145.0 million.
  • The web accounted for 14.2% of all sales compared with 11.4% in the first quarter of 2013.

On May 15 Nordstrom unveiled an e-commerce site for its Nordstrom Rack division, which sells discounted apparel, shoes and accessories. The new site also comes with a mobile app. Nordstrom was able to deploy its new Nordstrom Rack e-commerce site using technology and other expertise from its HauteLook business, a flash-sale, members-only site Nordstrom acquired in 2011 for $270 million.

“Our HauteLook acquisition of several years ago, which now has over 17 million members, has enhanced our e-commerce capabilities and now we’re combining forces to provide a powerful platform for elevating the customer experience in the online off-price segment. Nordstromrack.com built on the strength of both HauteLook and Nordstrom Rack,” Nordstrom president Blake Nordstrom told analysts. “It includes one of the largest merchandise offerings in the online off-price segment that encourages shopping a limited-time flash-sale event, side-by-side, with the persistent selection of off-price product.”

Nordstrom is looking to further integrate its e-commerce, HauteLook and Nordstrom Rack business units because discount merchandise is a fast-growing channel. In the first quarter, sales for Nordstrom Rack grew 20% to $120 million from $100 million in the previous year quarter, while comparable-store sales increased 6.4%, the retailer says. In comparison, comparable-store sales for is full-line stores decreased 1.9%.

“We are committed to expanding the merchandise offering as we learn more about what our customers want online and transitioning over time to a more consistent offering relative to our Rack stores,” Blake Nordstrom told analysts. “We’re off to a good start.”

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