February 20, 2012, 1:45 PM

Nordstrom doubles up on the web

The upscale retail chain is doubling its investment in e-commerce.

Mark Brohan

Research Director

Lead Photo

It was a good year all around for upscale department store chain Nordstrom Inc., but it was the direct business that scored the biggest sales increase. In fact with a growing direct business, which is virtually all online, Nordstrom, No. 34 in the Internet Retailer Top 500 Guide will spend almost $1 billion over the next five years to continue to support its e-commerce infrastructure, chief financial officer Michael Koppel told Wall Street analysts on the company’s recent year-end earnings call.

In 2012, spending on e-commerce infrastructure will approach $150 million. “In 2012, we plan to spend over $140 million in e-commerce, representing approximately 30% of our capital expenditures, compared to spend of almost $100 million or approximately 20% last year,” Koppel told analysts.

With its direct and e-commerce channel growing, over the next five years about 30%—$990 million—of the company’s planned $3.3 billion in capital expenditures will be spent on further developing its Internet infrastructure, Koppel said. “Our current five-year capital plan is approximately $3.3 billion,” Koppel told analysts. “About 60% of our plan is for new stores and remodels. Approximately 30% will fund e-commerce growth, which is double the amount we had in our five-year plan last year.”

Nordstrom also is in the process of adding nearly 400 e-commerce employees to its direct business and flash-sale e-retailer HauteLook, says president Blake Nordstrom. “At this time last year, we announced our acquisition of HauteLook and it gives us access to an emerging, growing channel,” Nordstrom told analysts. “We anticipate robust growth in this business to continue with ongoing opportunities to share learning that benefits us across channels.”

 

For the year ended Jan. 28, Nordstrom reported:

  • Direct sales increased about 30%. Based on that growth metric, direct sales for Nordstrom totaled about $917 million compared with about $705 million in 2010. The direct figure for Nordstrom also includes sales for HauteLook, which Nordstrom acquired in 2011. Sales for HauteLook grew about 60% in 2011, Koppel told analysts.
  • Total sales increased 12.8% to $10.50 billion from $9.31 billion in 2010.
  • Same-store sales grew year over year 7.2%.
  • Net earnings increased 11.4% to $683 million from $613 million.

Direct sales accounted for about 8.7% of total sales compared with 7.6% in 2010.

For the fourth quarter, Nordstrom reported:

  • Direct sales increased about 35%. The retailer didn’t break out direct sales in dollars.
  • Total sales increased 12.4% to $3.17 billion from $2.82 billion in Q4 2010.
  • Same-store sales grew year over year 7.1%.
  • Net earnings increased 1.7% to $236 million from $232 million.

Comments | 1 Response

  • One billion over the next five years on e-commerce infrastructure! I would love to know more specifics. Employees and warehouses for fulfillment I get... but what else can cost that much money?

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