Nordstrom's identity crisis Firm must decide if it wants to be like Sears, Saks or stay in middle

Theirs is a name synonymous with success, one that is able to generate consumer excitement and boost mall property values in a glutted retail marketplace. Indeed, the name Nordstrom has for years translated into retail gold.

How prized a merchant are they? Just ask Rouse Co., which last week succeeded in luring the Seattle-based chain to the Mall in Columbia after seven years of trying.


But when Nordstrom Inc. debuts a two-level store there in three years, customers may find a much different retail emporium than they are accustomed to in Towson or Annapolis, where Nordstrom has outlets.

To be sure, its trademark Italian marble floors and tuxedoed piano player will be there. So will its legendary women's shoe department and sales staff renowned for its customer service.


But Nordstrom's tony merchandise could be subtly -- or even radically -- altered.

That's because Nordstrom is at a crossroads, the first in its 95-year history, analysts say. At the heart of the miniature identity crisis is a question: Should it become more Neiman-Marcus or J. C. Penney, or maintain its middle ground?

"They're not Kmart and they're not Neiman-Marcus, and that's ++ been a challenge," said Margaret A. Gilliam, a retail analyst at CS First Boston Corp.

"Americans are aging and spending less, and for retailers, that's taking a lot of adaptation," said Kurt Barnard, a retail consultant and president of Barnard's Retail Marketing Report. "They also have to adapt to consumer spending that's different than 15 years ago. Although there are still a lot of wealthy people out there, most people can't afford to spend as freely anymore. So the question for them, to what extent can they sell what the general public can afford?"

In addition to socioeconomic changes and an overall lack of consumer confidence, which many analysts attribute to continued corporate downsizing and the long-term health of the economy, Nordstrom faces competitive challenges from a glut of apparel merchants.

Most notably, moderately priced retailers like Penney and Sears, Roebuck & Co. are gaining market share by appealing to consumers searching for bargains.

And at the other end of the spectrum, Neiman-Marcus Group Inc. and Saks Holdings Inc. -- fresh from an initial public offering that is fueling expansion and store improvements -- are blazing new trails to capture the upscale shopper.

Saks, for instance, is in the thick of a $300 million spending spree to open or acquire new stores and revitalize others. A new state-of-the-art distribution center set to open in Harford County early next year also is expected to boost catalog sales and aid merchandise shipping.


Meanwhile, retail giants such as Federated Department Stores Inc. and May Department Stores Inc. are prospering amid an industry shakeout and consolidation, using the leverage of their enormous buying power to dominate markets.

For the first nine months of this year, Federated -- operator of Bloomingdale's, R. H. Macy & Co. and Burdine's -- and May, which owns Hecht's, Filene's and Lord & Taylor, generated $10.2 billion and $7.6 billion in sales, respectively. By comparison, Nordstrom's sales totaled $3.1 billion.

While Nordstrom sales were up 8.6 percent in the third quarter, and net income jumped an impressive 15.6 percent to $34 million, the past year and a half have not been kind to the Seattle chain.

Until the third quarter, earnings had been down the past six consecutive reporting periods. In the nine-month period ended Oct. 31, for example, profits were down 5.6 percent, and year-to-date, comparable store sales have risen a scant 1.5 percent.

'Margin pressure'

"Everyone in Nordstrom's business is feeling margin pressure," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based consulting firm. "And they, in particular, have plenty of problems. Their future won't be any walk in the park."


Industry analysts blamed the declines on too much inventory, a strategy to offer swankier clothing brands to women in a bid to differentiate Nordstrom from competitors and internal management shakeups over the past year.

Brooke White, a Nordstrom spokeswoman, blamed the net income drop on a new computerized merchandise tracking system, markdowns associated with realigning its merchandise mix and the decision to move certain longtime vendors internally throughout its stores.

"The system is great for tracking merchandise that we own, but it can't tell you what's missing, or what the customer is asking for," White said. "It meant more markdowns than we had anticipated. But we're always in a state of adjusting our merchandising, to respond to what people want, and we think now we're on the right track."

Analysts agree.

Temporary setback

"Is this just a blip? Yes," Davidowitz said. "No other store does what they do in terms of service, and with the decentralized format they have, they can be more sensitive to local buying needs."


"They're a strong and creative company," said Jeffrey Edelman, a Deutsche Morgan Grenfell retail analyst in New York. "They may need to digest a few things near term, but I believe they'll get back to their normal performance and growth before long."

It's anyone's guess, of course, whether Nordstrom will be back on track by the time it premiers its newest Baltimore-area store, which is projected to ring up $68 million in sales a year and become the focal point of a comprehensive rejuvenation being planned for the Mall in Columbia.

But given its track record and ability to enhance other area malls, Nordstrom is almost certain to have a dramatic impact.

'Going to be gorgeous'

"Their strategy for years has been to go into high income areas where their products will likely be well-received, and Columbia is no different," Gilliam said. "And they do an immense amount of market research beforehand."

"That store is going to be gorgeous," Davidowitz said. "It's going to do business like you never saw."


Pub Date: 12/28/96