Nordstrom Market Selacton Background Founded in 1901 ae a retall shoe business in Seatte, Nordstrom later incorporated inthe state of Washington in 1946. Today, Nordstiam s one of the nation’s leading fashion specially cetalar, with stores located in 30 states as of March 18, 2012. The west and east coasts of the United States are the areas in which Nordstrom has the lagest presence. ‘As of March 16, 2012, Nordstrom included 115 Nordstrom branded fulltino stores, an online storo at ‘wwrw.nerdsiram com, and 106 offprice ‘Nordstrom Rack’ stores. Other retall channels include their online private sale subsidiary HauleLook acquived in February 2011, twa ‘Jefirey' boutiques, one philantivopic 'yeasure ..bond stove and ‘one clearance store thal operates under the name Last Chance’ HauleLook is a LosAngeles based e-aier thal offers ‘lash sales on designer fashion merchandise may be a key to Norcsiroms future growth. HauteLcok (eww hautelook com) ‘offers merchandise at 60-75% off reguiar once. Growth Through Market Excansion Inthe U.S. market ithas been diffcult for retalles to grow sine household income adjusted for inflaton is often fat fot agative. And even though Nordstrom appears to upper middle class households thay have also been hit hard by the ‘economy. Thus Nordstrom has grown via expansion into other states outside its home in Seat, Washington. This actually is somewhat ofa continuation of its store growth strategy going back twenty-five years but store growth and market expansion is more important than ever. Between 2008 and 2011 continued its geographic expansion as shown in exhibits 1 and 2. Nordstrom generally opened between a dozen and 20 stores annualy with the major focus on opening of Nordstrom Rack Stores. Over the ist five ‘years Nordstrom Rack stores have almost doubied. Atthe same tme the firm experienced inconsistent financial and ‘operating performance as shown in oxhibt 3. In fact 2011 operating profits ware lower than in 2007: a rather sobering ‘excerience for the sarior management team. Some analysts are surpcised why with tis inconsistant operating performance the fem continues to increase its dividend to shareholders.Exhibit + Nordetrom Store Growth (2008-2011) 1 1 Maryland 1 1Ba Nordstrom Store Openings (2000-2011) ‘pavado suone301)0 #ent [Noratrm Financia and Operating Peformance fatal year ended. January 2007-2011) 2007 2008 ‘anual Sass Bas 827 Gross Profit $3302 92.855 [Net Profit (After Taxes) S713 $401 Same store sales growthidecline 3.90% -9.00% Sales per square foot of reall pace $435 $388 Inventory Turnover 516 520 of Stores Nordstrom 108 ‘Nordstrom Rack (and others) 3s w arnings per Share (Fully Diluted) $288 $1.83 Dividends per Share ost oe # of New Stores B ‘Noe ules Gra Pr, Net Prt inline () 2009 2010. S828 $9310 $290 $3413 sul $613 420% 8.10% $368 $397 Sal 556 mus. n 9 201 $275 emt 076 5 20 zon S10497 205 $683 720% sat 5.56 uy 108 su om 2Questions 11. Why do you boliove Nordstrom is opening more Nordstrom Rack Stores than its traditonal Nordstrom stores? 2. Analyze Nordstrom's financial and operating performance and store growth and draw conclusions on the effectiveness, cof the market expansion strategy. 3. Register forthe HauteLook website and evaluate if you think Nordstrom should put more ofits emphasis on gronth sales via e"allng and less on its brick and mortar stores. Do the same for Nordstroms online store (www.nordstrom.com). 4, Should Nordstrom exand to markets outsida the United States? If so, what markets do you think would be most atiaetive?