Running head:NORDSTROM

Nordstroms: The Stability of a Shoe

Kellie Canet

Arizona State University

OGL260- Module 5

September 24, 2020

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Nordstroms: The Stability of a Shoe

If you are from the Pacific Northwest there are a couple of brands that are staples in your

world, Nordstroms is one of these. For many the semi yearly sale brings joy and for others

walking around and admiring all the lovely clothing masterpieces can fill hours of a day.

However, Nordstroms was not always the fashion icon it is today, founded in 1901 by two Seattle

men, it was a shoe store and not until the 1960’s did the next generation of leaders expand into

womens clothing (Tyler, 2019). Ten years later Nordstrom went public and has now reached

international markets to serve shoppers across the globe (Nordstrom, 2020). Through

examination of their history, defining business and financial risk and how COVID-19 up ended

stability. We will have a better understanding of how Nordstrom stacks up in terms of the impact

of COVID-19.

Based out of Seattle, Washington Nordstrom was founded on the belief that, “Success

would come by only offering customers the very best service, selection,quality and value”

(Nordstrom, 2020). The two founding men, one a shoe maker, Carl Wallen and the other an

immigrant from Sweden, John Nordstrom opened their first store on Pike Street. Seeing the

success of their shoe stores they acquired Best Apparel in 1963, now run by the second

generation in the Nordstrom family (Tyler, 2019). This had some risk, knowing that whatever

venture the firm takes on could have an impact on the firm's revenues and potentially greater

volatility in stakeholders shares, while not a publicly traded company at the time the company

was expanding into other markets. When examining the business risk Nordstrom was taking it is

important to note how we are defining business risk as, “The variation in a firms (Nordstrom’s)

earning” (Keown, Martin & Petty, 2020). Increasing their liabilities and debt and changing their

operating risk, they were now immersed in two markets. This risk paid off, the company went
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public and expanded to international markets and is the parent company of several different

internet shopping sites (Nordstrom, 2020).

Now here comes COVID-19, the pandemic that none of us were prepared for and none

of us wanted to have to navigate. The year is 2020 and nothing is the same as it was twelve

months ago. No one knows what will happen next and that includes Nordstrom. In terms of

defining business risk there are four key components, stability of the domestic economy,

exposure to, and stability of, foreign economies, sensitivity to the business cycle and competitive

pressures in the firm’s industry (Keown, Martin and Petty, 2020). The stability of the market is

gone and the international market is just as volatile. The business risk has increased

exponentially. This year has turned a company that was not as sensitive to the business cycle as

defined above, into reporting a net earnings loss of 255 million dollars as of August 1, 2020

where a year before they had reported a net profit of 141 million dollars in 2019, this means that

shareholders lost 1.62 per share (Thomas, 2020). As a financial manager this is going to have an

impact on future growth and earning power. The company reported a loss of 370 million dollars

before interest and taxes given the pandemic, but was able to pay off 300 million dollars to its

creditors due to cost saving measures taken early on (Nordstrom Financials Q2, 2020). What this

tells us is that to minimize the impact on the firm the company attempted to reduce the operating

and financial risk they were facing. The semi annual sale was pushed back to Q3 and will aim to

recover some of the revenue loss due to COVID-19 as stated by COO, Erik Nordstrom (Thomas,

2020).

What does all of this mean for Nordstrom and the financial managers responsible for their

success? They will have to lean into what they set out to do, “Offering customers the very best

service, selection, quality and value” (Nordstrom, 2020). They are competing with other retailers
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to gain the attention of shoppers to help offset all the loss due to COVID-19. Aiming to set them

apart from the competition to help to stabilize the firm's financial risk. No one knows what the

rest of the year will bring, but one thing is for certain, by leaning into what they do best

Nordstrom will work to close the gap of the loss due to COVID-19 and aim to bring stability

back to the firm and minimize the risk it has become to be a retailer in 2020.
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References

Company History. (n.d.). Retrieved September 24, 2020, from,

https://nordstrom.com/aboutus/history

Keown, A. J., Martin, J. D., & Petty, J. W. (2020). Foundations of finance: The logic and

practice of financial management. Harlow, CA: Pearson Education.

Nordstrom Reports Second Quarter 2020 Earnings. (2020). Retrieved September 24, 2020,

from

https://investor.nordstrom.com/news-releases/news-release-details/nordstrom-reports-

second-quarter-2020-earnings

Thomas, L. (2020, August 25). Nordstrom's sales fall 53% as department store chain

suffers store closures amid pandemic. Retrieved September 24, 2020, from

https://www.cnbc.com/2020/08/25/nordstrom-jwn-reports-q2-2020-results.html

Tyler, J. (2019, January 04). Blake Nordstrom, a top executive and heir to the

department-store dynasty, has died. Here's how the Nordstrom family built their store

empire. Retrieved September 24, 2020, from

https://www.businessinsider.com/nordstrom-family-how-they-built-department-store-

empire-2019-1