Popular American department store brand Nordstrom has announced some sweeping cuts to its locations, as the coronavirus takes a significant toll on its business.
The Seattle-based company would be closing as many as 16 store locations and three boutiques in the coming months, USA Today reports. The company is hoping to shed the pandemic’s load and weather the current financial storm.
Poor Financial Results Due to COVID-19
The news followed the company’s presentation of its financial report for the first quarter of the year. Nordstrom confirmed that its sales fell as much as 40 percent across the past quarter.
Nordstrom’s financial report showed that it had made $3.33 in loss per share, while revenue stood at $2.12 billion. The firm’s revenue fell from $3.44 billion in the first quarter of 2019, while net sales for Q1 2020 also stood at $2.02 billion – excluding its credit card revenues.
The Seattle-based firm lost $521 million in the quarter, down from a net income of $37 million – and earnings per share of 23 cents – in the same period last year.
The company also confirmed that sales at its full-price department stores were down 36 percent, as most of the stores had to close down due to the virus. Sales at off-price Nordstrom Rack locations were also down by 45 percent. However, the firm did profit from digital sales, which grew by 5 percent to hit the $1.1 billion mark.
Analysts at Refinitiv had estimated that the firm would make a loss of $1.07 per share, while revenues stood at $2.42 billion. The firm’s results were significantly worse. However, it’s also challenging to estimate how much of this was a result of the coronavirus. With various retail companies feeling the pinch of the lockdown as well, this isn’t so surprising.
Despite the performance, however, executives at the firm expressed their confidence in the company’s future. In prepared remarks, company chief executive Erik Nordstrom said:
“We’re entering the second quarter in a position of strength, adding to our confidence that we have sufficient liquidity to successfully execute our strategy in 2020 and over the longer term.”
Will Reopening Stores be Enough to Save Nordstrom?
The firm further confirmed in a post that up to 40 percent of its locations were back to full operation, after they had to stay shut since March. It expects that its locations will be back to full capacity by the end of June.
Still, it will be closing down some of its locations to save costs. Of the firm’s 116 full-line stores, it will close down 16.
While the news sent the company’s stock surging by 1 percent on Friday, it’s worth examining how much of an effect the company’s policy could have. Apart from the fact that it will have to lay off workers, the company appears to be overestimating the impact of the stores returning.
Nordstrom’s post confirmed that it sprawling New York location was among the 40 percent that had reopened. However, it’s unclear whether New Yorkers would be persuaded to come out of their homes to shop. The state remains the epicenter of the pandemic, and residents aren’t comfortable with the idea of returning outdoors just yet.
The same goes for the other locations that have opened across the country. The fact that a store is open for business isn’t necessarily enough to bring people back. Nordstrom might be better served if it focuses on its digital platform – a business aspect in which, as the report shows, appears to be thriving.
Digital sales just might be the key to saving Nordstrom from the bankruptcy fate that has befallen several other top retail brands.