This past quarter, Nordstrom Rack was able to produce an improvement in its sales trends and Placer data shows a very strong traffic gain during February (below). The increase was driven by an improvement in traffic, the merchandise, and conversion rate, per management. The improvement in conversion rate is a testament to the success in re-merchandising and improving the value for shoppers.
Following 19 new store locations in 2023, 22 more are planned for 2024. Part of the strategy with Rack’s expansion is to expand its catchment of omnichannel spend and move those customers up to Nordstrom's full-price stores over time. However, the strategy is taking time to materialize; in fact, it more seems like Nordstrom and Nordstrom Rack are sharing the customer – one cookie, two mouths.
Below we show the Thousand Oaks Nordstrom and Nordstrom Rack locations. According to our data, the full-price Nordstrom location has more visitors and more loyal visitors. We would have expected that Rack with its treasure hunt value offering would produce more frequency, but it doesn’t. The neighboring T.J. Maxx and Marshalls have more loyalists and a higher average frequency which suggests that part of Nordstrom’s soft results since 2015 could be because they split loyalty where full-price Nordstrom and Rack stores are too close.
Burlington produced +2% comparable-stores sales growth (+4% excluding clearance). While lower than its peers, was above the -2% to flat plan, and which produced an improvement in the comp to 2019. CEO Michael O’Sullivan shared, “Firstly, we continue to see strong selling at our opening price points. The lower income customer, the need a deal shopper is responding well to these values. This is a very important customer for us. A year ago, this shopper was really struggling with a higher cost of living and with the loss of pandemic-era benefits. This customer is still fragile. The cost of living is not declining, it is just going up less quickly. That said, this represents an improvement versus last year...Secondly, what really drove our incremental growth in Q4 2023 was the success of our strategies and businesses targeting trade-down or slightly higher-income shoppers. These customers responded well to the higher mix of recognizable brands in our apparel and accessories businesses. These shoppers also grow very strong selling across our key holiday categories in gifting, accessories and home decor. Frankly though, looking at the results of our peers, I am disappointed that we didn't drive stronger comp growth with these shoppers. There is clearly a bigger opportunity. The implication is that we have to offer stronger and even more compelling values on the brands and styles that these trade-down shoppers are looking for." Vendors looking for volume following Macy’s store closings will be finding a welcoming home at Burlington.
Reaching more affluent shoppers is what Burlington is aiming for with its new store program. Next year, the plan is 140 openings (mostly in new markets), offset by 40 closures (in low-performing, less affluent markets). The 140 will be 20 more than opened during 2023. On this, O’Sullivan shared, “Each potential location is analyzed carefully based on the traffic, trade area demographics, and co-tenants. And based upon those detailed characteristics, we feel pretty excited about the new stores that we're planning to open this year…We typically manage our new store pipeline 2-3 years out. We still have plenty of work to do on our 2025 new store pipeline.” 32 of the 65 leases acquired from Bed Bath & Beyond were opened in Q4 2023, with the remaining 33 scheduled to open in the first half of 2024.
As to February trends, O’Sullivan said, “I would describe the trend in February are softer than we had anticipated…We attribute that softness to maybe some unfavorable weather early in the month and then a slower pace of tax refunds versus last year...Our core customer is just extremely sensitive to the timing of tax refunds, especially the timing of earned income tax credit. Now we're expecting the tax refunds will catch up over the next few weeks.”
