Nordstrom Drops After No-Merchandise Store Puzzles Investors

Subscribe to Bloomberg | Quint
The Daily Newsletter
News & Stock Alerts

(Bloomberg) -- Nordstrom Inc.’s plan to open a smaller store concept with no inventory isn’t sitting well with investors.

The shares suffered their worst decline in more than a month after the department-store chain announced the new “neighborhood-hub” shop, which will open on Oct. 3 in West Hollywood, California. The idea is to let customers try on clothing and accessories with the help of a personal stylist. If shoppers like what they see, they can order the goods and have them delivered.

The move embraces a model used by upstarts such as Warby Parker and Bonobos, which generally rely on e-commerce but have boutiques where customers can touch and feel the wares. Smaller shops in urban areas also are less reliant on shopping-mall traffic to fuel sales.

But Nordstrom is an upscale chain known for its selection and service, so the minimalist approach was puzzling to investors. On a day when shares of most major retailers were climbing, Nordstrom fell as much as 5.4 percent to $43.59. The stock had been down 3.8 percent this year through the end of last week.

The new store, called Nordstrom Local, will encompass one styling suite, eight dressing rooms and a central meeting space where customers can talk to personal stylists. Services at the location include on-site alterations and tailoring, same-day delivery and manicure services. Customers can even have a glass of wine or beer.

Aiming for Convenience

“We know there are more and more demands on a customer’s time and we wanted to offer our best services in a convenient location,” Shea Jensen, Nordstrom’s senior vice president of customer experience, said in a statement. “Finding new ways to engage with customers on their terms is more important to us now than ever.”

The opening of a single 3,000-square-foot (280-square-meter) location represents a low-risk experiment for the company, which typically operates stores of 140,000 square feet. While the West Hollywood shop won’t have inventory on-site, the stylists will be able to transfer merchandise in for customers from other Los Angeles-area Nordstrom stores, according to Anya Pavlovic, a spokeswoman for the retailer. She also said that there are no plans to open similar shops at this time.

“We’ll follow the pace of our customers, and we’ll move as fast or slow as they want us to,” Pavlovic said in an email.

Industry Pummeled

Department stores have been scrambling to overhaul their operations after years of slowing sales. Macy’s Inc., J.C. Penney Co. and Sears Holdings Corp. have been closing hundreds of locations and trying to beef up their online operations.

Nordstrom hasn’t been hit as hard by the industry downturn. In August, the company reported a same-store sales gain of 1.7 percent. Analysts had predicted a drop of 0.5 percent.

Still, Nordstrom is working on a turnaround that may include taking the company private. In June, the Nordstrom family said it was considering a buyout, which would provide the opportunity to improve sales and test new concepts out of public markets.

Bloomberg
Stay Updated With Business News News On BloombergQuint
Subscribe to Bloomberg | Quint
The Daily Newsletter
News & Stock Alerts