Forget about faux fur, puffy vests or warm woolen knits; the most fashionable trend at department stores this holiday season has nothing to do with garments, but everything to do with looking good. This comes as the great department store digital spin-off trend resembles the response to pretty much any hot new look — everybody rushes in and is dying to have the look.
The look, in this case, has now been replicated three times in a month, by Macy’s, then Kohl’s and most recently Nordstrom. All of these stores are reported to be mulling the same thing rival Saks Fifth Avenue did earlier this spring, when it announced plans to separate its faster-growing digital assets from its portfolio of core physical stores.
Although Nordstrom’s reported foray into this value-finding patch is still unconfirmed by the company, Bloomberg reports that the Seattle-based luxury retailer has attained the services of Alix Partners to study the feasibility — and financial rewards — of possibly spinning-off its Nordstrom Rack unit into a completely new company.
That’s the same advisory firm that lit a fire under Kohl’s a week ago, with an open letter, a 1% stake and list of promises about the riches that await on the other side should they choose to go forward as two companies.
In Nordstrom’s case, the purported spin-off of its off-price Nordstrom Rack unit follows a 35% one-month drop in its stock price, triggered by low inventory during the third quarter of this year.
Nordstrom has also suffered from things like high freight and labor costs and supply chain snags that have proven difficult to recover from.
See also: Today In Retail: Warby Parker Files For IPO; Nordstrom Sales Still Below 2019 Levels
Additionally, Nordstrom has stated its average price dropped by 4%, meaning consumers looking to buy luxury brands have been left disappointed by the store’s current offerings. To make matters worse, Nordstrom Rack has been deprived of merchandise.
Is This a Turning Point for Luxury Department Stores?
As PYMNTS reported, experts have conjectured for a while that Nordstrom was interested in pursuing a merger and acquisition. In 2018, Nordstrom’s special board committee discussed Nordstrom going private.
Nordstrom has continued to build relationships and join forces with companies like Fanatics and ASOS, as well.
Interestingly, the above Nordstrom news follows Macy’s announcement last month that it also was working with Alix Partners to revisit its business operations.
See also: Nordstrom Considers Spinning off Rack Into New Business
Other Nordstrom competitors, like Saks Fifth Avenue and Kohl’s, have been seriously considering doing the same.
Earlier this month, activists urged Kohl’s to either sell or break off from its online business. Neiman Marcus has found itself in the same boat, and is also considering breaking up into different companies.
A Closer Look Into Nordstrom’s Efforts
Last month, PYMNTS reported that following the news that its average price had fallen by 4%, Nordstrom said this was the result of Nordstrom Rack’s underperformance.
Read more: Does the ‘Ord’ in Nordstrom Now Stand for Ordinary?
“When we look across the landscape, we need to deliver more,” Nordstrom said at the time. “We need to grow market share and deliver greater profitability, and we are acting with a sense of urgency to do so.”
Last quarter, Nordstrom sales performed better than the year prior, but digital sales took a hit.
As PYMNTS noted last month, “Nordstrom’s net sales increased 18% in the third quarter of 2021 compared to the same time a year earlier. Digital sales dropped 12% in Q3 compared with the same period in fiscal 2020 and was up 20% compared to fiscal 2019.”
See also: Nordstrom Still Looking to Recapture Pre-Pandemic Glory
Last August, PYMNTS also reported that Nordstrom’s 2021 second-quarter sales were a bit more stable, driven by consumers looking to update their wardrobes with activewear and loungewear. At the time, Nordstrom said they were confident the second half of the year would bring opportunity amidst uncertainty.
At the time, Nordstrom’s 2021 revenue was expected to jump upwards of 35% compared to 2020, citing pent-up consumer shopping demands. Nordstrom previously estimated this revenue growth to top 25%.
Related: Nordstrom Prepared For ‘Range Of Scenarios’ Amid Continued Uncertainty
Unfortunately, expectations have not met reality. Nordstrom said that its largest annual fashion event, the Nordstrom Anniversary Sale in July, saw a sales increase of 1% when compared to 2019. Because of the pandemic, the sale event had been moved to the third quarter.
The company said that it is looking to change this and remains focused on learning about digital consumer interaction and data-driven sales tactics.
Key Takeaway
Amidst the pandemic’s continued disruption, some retailers are innovating fast and thriving, while others are struggling to digitize and bring their business models into a new, fast-evolving era.
Nordstrom has taken many unique projects lately, such as adding Cuvée Beauty low-effort hair products to its websites and opening up an immersive Dr. Martens pop-up in New York City last fall.
Perhaps if this same kind of imaginative, creative energy can quickly be channeled back into Nordstrom’s business model, both the company and the consumers it serves will be happy with whatever comes next.
Read more: Nordstrom Adds Cuvée Beauty Haircare Products
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