Analysis of Nordstrom

Summary

Nordstrom is taking advantage of omnichannel and online presence.

Nordstrom did not overperform its peers and is not an undervalued stock, but it is managing to go through the omnichannel transition smoothly.

Some strong notes about Nordstrom is that it managed the transition to an omnichannel model successfully.

Nordstrom's weakness is in the low operating margin resulting from rising SG&A expenses. It shouldn't be a surprise that these costs are rising fast, considering the company's high investments for digital expansion and a wide range of services and initiatives in the omnichannel business. There are several of these initiatives worth mentioning. A recent one is Nordstrom Local, a test retail concept focused on services and located in West Hollywood, which gives customers the possibility to access personal stylists, alterations, online orders and more. The management mentioned positive results from this initiative and said the learnings from the test can be applied to the business to drive customer engagement and increase market share.

Nordstrom confirms that it is one of the third-party retailers with the strongest online presence (around 25% of sales), and expanding omnichannel business and a big focus on increasing and enhancing additional services to drive customers' engagement. It has a strong  will to  leverage digital capabilities in a proactive way.

Big players tend to be in a better position compared to the smaller ones, for several reasons. I think the same is happening in the retail industry, where overcapacity and the increasing penetration of eCommerce and omnichannel are benefiting big players at the expense of the smaller ones. Running a successful omnichannel business needs financial resources to invest, a solid network of stores and a large clientele base to reach. Big players can move sales to the digital channel more easily (avoiding market share losses) and push customers towards cross channel purchasing patterns.