E-commerce for Nordstrom accounts for 15% of total sales

 BY MARK BROHAN Research Director

Web sales increased 23% for Nordstrom in 2014, with online revenue topping $2 billion. With a growing e-commerce operation, the chain says it will invest more to support expansion.

The past year online was another good one for Nordstrom Inc. as the web now accounts for 15% of total sales.

With its e-commerce business on an upward growth curve, Nordstrom, No. 24 in the Internet Retailer 2014 Top 500 Guide, will continue to invest heavily in its online operation, chief financial officer Michael Koppel told Wall Street analysts yesterday on the company’s year-end earnings call.

“We expect to invest $4.3 billion or 5% of sales over the next five years, and technology is 35% of the plan, reflecting an increased shift towards foundational investments,” Koppel told analysts, according to a transcript on SeekingAlpha.com. “This also includes the expansion of our fulfillment network. This supports a $2.5 billion online business today that is anticipated to grow by over $1 billion in the next several years.” 

For the fiscal year ended Jan. 31, 2015, Nordstrom reported:

• E-commerce sales increased 23%. Based on that metric, Internet Retailer estimates that web sales totaled $2.005 billion compared with $1.630 billion in 2014.
• Total sales increased 7.8% to $13.110 billion from $12.166 billion in 2013.
• Comparable-store sales increased 4%.
• The web accounted for 15.3% of all sales compared with 13.4% in 2013.
• Net earnings were $720 million compared with $734 million in 2013.

The high-end merchant also is focusing on the role of merchandise returns because online customers often bring items they want to return to a Nordstrom store, generating more foot traffic, President Erik Nordstrom told analysts.

“Returns is a big strategic subject for us,” he told analysts. “For us, a big part of the value in our approach to returns is in having returns in the store. Well over 60% of our Nordstrom.com returns end up at our full-line stores, and well over 70% HauteLook and Nordstrom Rack returns end up at our Rack stores.”

The return-to-store program in turn generates substantial foot traffic, he said. “Last year at Rack stores, that drove an additional million visits to our Rack stores,” he told analysts.

For the fourth quarter:

• E-commerce sales increased 19%, although Nordstrom didn’t break out specific metrics.
• Total sales increased 9% to $3.938 billion from $3.614 billion in the prior year.
• Comparable-store sales increased 4.5%.
• Net earnings were $720 million compared with $734 million in the same period a year ago.

“We continued to see the ongoing evolution of retail with the accelerated growth in e-commerce, the continuing importance of stores and the increasing customer interaction between them,” Blake Nordstrom told analysts. “Customers increasingly expect a personalized experience that merges the richness of stores with the convenience of online.”