Nordstrom, Inc., a fashion specialty retailer, provides apparel, shoes, cosmetics, and accessories for women, men, young adults, and children in the United States and Canada. It operates through two segments, Retail and Credit. The Retail segment offers a range of brand name and private label merchandise through various channels, including Nordstrom branded full-line stores and online store at Nordstrom.com; Nordstrom Rack stores; Nordstromrack.com and HauteLook; Trunk Club clubhouses and TrunkClub.com; Jeffrey boutiques; and clearance stores that operate under the Last Chance name. The Credit segment provides access to various payment products and services, including a Nordstrom-branded private label card, two Nordstrom-branded Visa credit cards, and a debit card. As of June 30, 2017, the company operated 354 stores in 40 states, including 122 full-line stores in the United States, Canada, and Puerto Rico; 221 Nordstrom Rack stores; 2 Jeffrey boutiques; and 2 clearance stores, as well as 7 Trunk Club clubhouses. Nordstrom, Inc. was founded in 1901 and is based in Seattle, Washington.
Business Analysis of Nordstrom
The Retail Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how Nordstrom compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by Nordstrom to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of Nordstrom with an interactive chart.
- Revenue Growth: Nordstrom reported a revenue growth of 6.9% year-on-year during 2016. Apparel Retail Industry grew at 5.0% in the same period
- COGS share of Revenues: As a percentage of revenue, Nordstrom spent 63.5% of its total revenues on COGS. Apparel Retail industry average (COGS share of revenue) in the same period was 62.3%
- R&D share of Revenues: Nordstrom R&D share of Revenues details are not available because either company does not share the data or we do not have it
- SG&A share of Revenues: As a percentage of revenue, Nordstrom spent 28.9% of its total revenues on Sales, Marketing, and General Administration (SG&A). Apparel Retail industry average SG&A spending in the same period was 27.0%
- Inventory share of Revenues: As a percentage of revenue, Nordstrom spent 13.5% of its total revenues on Inventories. Apparel Retail industry average Inventory spending in the same period was 14.4%
- Accounts Payable share of Revenues: As a percentage of revenue, Nordstrom invested 9.2% of its total revenues on Accounts Payable (A/P) Apparel Retail industry average Accounts Payable investment in the same period was 7.0%
- Accounts Receivable share of Revenues: As a percentage of revenue, Nordstrom invested 1.4% of its total revenues on Accounts Receivable (A/R). Apparel Retail industry average Accounts Receivable investment in the same period was 1.5%
- PP&E share of Revenues: As a percentage of revenue, Nordstrom invested 25.9% of its total revenues on Property, Plants, and Equipments (PP&E). Apparel Retail industry average PPE investment in the same period was 17.6%
- Intangibles share of Revenues: As a percentage of revenue, Nordstrom invested 3.0% of its total revenues on Intangibles. Apparel Retail industry average Intangibles investment in the same period was 4.9%
- Net Margins: Nordstrom Net Margins in the year 2016 were 4.2%. Apparel Retail industry average Net Margins in the same period were 5.2%
Sector and Industry Association of Nordstrom
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.
Nordstrom is associated with Retail Sector and Apparel Retail Industry.
Retail sector is comprised of the following industries: Broadline Retail; Grocery Retail; Specialty Retail; Apparel Retail; Home Improvement Retail; Specialized Consumer Services. The definitions for each of the industries is as follows:
- Broadline Retail industry includes retail outlets and wholesalers offering a wide variety of products including both hard goods and soft goods.
- Grocery Retail industry includes retail stores that primarily offer non-perishable food that is packaged in cans, bottles and boxes, with some also having fresh produce, butchers, delis, and bakeries
- Specialty Retail industry includes retailers and wholesalers concentrating on a Single Class of Goods, such as electronics, books, automotive parts or closeouts. It also includes automobile dealerships, video rental stores, dollar stores, duty-free shops and automotive fuel stations not owned by oil companies.
- Apparel Retail industry consists of retailers and wholesalers specializing mainly in Clothing, Shoes, Jewelry, Sunglasses and Other accessories.
- Home Improvement Retail industry includes retailers and wholesalers concentrating on the sale of home improvement products, including Garden Equipment, Carpets, Wallpaper, Paint, Home Furniture, Blinds and Curtains, and Building materials.
- Specialized Consumer Services industry includes providers of consumer services such as Auction Houses, Day-care Centers, Dry Cleaners, Schools, Consumer Rental Companies, Veterinary Clinics, Hair Salons and providers of Funeral, Lawn-maintenance, Consumer-storage, Heating and Cooling installation and Plumbing services.
Industry Ranking of Nordstrom
With $14.4 billion revenues, Nordstrom ranked number 3 of all the companies in the US Apparel Retail industry. There were a total of 36 public companies in the US Apparel Retail industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Apparel Retail industry by revenues during 2016 were:
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.