Nordstrom 4Q15 Earnings Call Notes

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Blake W. Nordstrom – Co-President & Director

Michael G. Koppel – Chief Financial Officer & Executive Vice President

30% of our business will probably be done online by the end of this decade

“clearly, we’re seeing a, what has been a very noticeable change in our business model. I think one of our slides indicated by the end of this decade that we’re going to have a large proportion of our business about 30% being done online. That’s all the way from 5% that it was back in 2005 and that is a model that behaves enormously different than the mall-based model.
And so we have a lot to learn about that and we have to keep our lens on as it relates to how the customer sees us and how the customer wants to be served, but at the same time, we have to do it effectively. ”

Learned that we could be more productive with technology investment capital

“I think part of what we’ve learned along that journey is that we could likely be more productive with that capital.”…”In terms of the returns of the past, we’ve had some projects that have delivered some great returns and some that haven’t. That, by the way, is part of the business. It’s a test and learn and iterate business. But that being said, as I think over the last several years, we’ve learned that we can likely do it better. And at this point, we don’t feel that the moderation in investment is going to limit our growth in that channel.”

No sign of deterioration in the credit portfolio

“In terms of the health of the Credit portfolio, it continues to be very strong. We’re not seeing any deterioration in terms of the quality of the portfolio, the timeliness of payments, et cetera.”

Looking to understand how to get more efficient

“we need to continue to view the customer experience not just by channel but across the enterprise, and understanding how we can serve the customer on an enterprise level. And there’s a number of things we can do. Currently today, we fulfill out of multiple locations and are there opportunities for us to get more efficient at that? That creates not only additional labor cost but it creates additional shipping cost because you’re shipping multiple items per an order. We’re also looking at how spread out we want our assortment to be, because the more lower-price items we have in it, the less unit profitability we gain.”

Peter E. Nordstrom – Director, Executive VP & President-Merchandising

Other people’s inventory problems spill over to us because we have to be competitive on price

“When business is bad, it accelerates that clearance part of it, but the part that we’re talking about is promotional activity, where a retailer will take everything that they have to offer, something that’s a week old in the inventory and something that’s eight weeks old in the inventory and mark everything down. And that’s what really erodes the margins. For us, we don’t generate any of those events ourselves, but we have to be competitive for price. So if it’s a price that’s available for the customer and for all customers, to maintain integrity and trust and confidence of our customers, we’re going to match that price. So that’s what puts the pressure on us in terms of our promotional activity. ”

We try to focus on the things that we can control rather than the macro

“Some of the stuff is somewhat cyclical. But if we get into a position of trying to rationalize it based on external or macro factors that we can’t control, then that’s not a very good place for us to be. So what we really try to focus on are the things that we can control and that’s delivering great service for customers, having a great relevant experience for them, both online and in stores, seamless integration, new products for them to buy, the excitement of what retailing can provide, And we talk about in terms of marketing, the hopefulness and the cheerfulness of what this is about. “