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JWN Nordstrom

Participants
Heather Hollander Head, IR
Erik Nordstrom CEO
Pete Nordstrom President and Chief Brand Officer
Anne Bramman CFO
Omar Saad Evercore ISI
Edward Yruma KeyBanc Capital Markets
Dana Telsey Telsey Advisory Group
Oliver Chen Cowen
Mark Altschwager Baird
Call transcript
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Operator

Greetings and welcome to the Nordstrom Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode.

We will begin with prepared remarks, followed by a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I’ll turn the call over to Heather Hollander, Head of Investor Relations for Nordstrom.

begin. may You

Heather Hollander

thank and joining us. Good you afternoon for

mention we be referring be I viewed to begin, want that nordstrom.com. to on the Relations we’ll Investor Before in section slides which can

and Financial Safe call a so may discussion to the with now, Anne in discuss Chief Erik include and call statements, Executive business Nordstrom, Chief Harbor Our Chief please turn Officer; Brand Participating I’ll language. quarter Officer; over Officer, Pete forward-looking third the provide Erik. performance. refer slide are update to who Nordstrom, will today’s our company’s President Bramman, and And the

Erik Nordstrom

Good you for thank afternoon us. and joining

We to and customer have physical commitment assets from innovative and long a service, brand interconnected benefited digital partnerships.

better those we capitalize on move need aggressively However, to strengths. faster and to more

key with Rack to chain expertise we optimizing and our greater urgency sense business, of to with February, a financial made commitments across so. external we track and plans in quarterly we supply and our at We've market with grow performance, taken engaging increasing in on consultants we a profitability and are comprehensive three the improve deliver the Nordstrom We we acting were to results across share Day to look when While on Investor deliver our stated profitability, more. deliver need need areas: look our do to improving landscape, opportunities function-specific and our line inventory at are flow.

satisfied is should not are with be. Rack it lagging recovery We all think our our we as business at what clearly

performance accelerate identified taking front clear see clear profitable of have growth. path and However, to and we improve improvement in the are are actions to we we encouraged us with that

drawn levels brands challenged a Nordstrom such Rack to terrific at by key are price. Rack apparel and low First, categories been shoes. purchase has brands to in Customers premium premium inventory as women's in Nordstrom

in our of other These are are they Rack sold also penetrated at XX% more at business at Off-Price brands the brands fact, the Rack. highly than In top retailers. Nordstrom are

Rack inventory, represented are of and are sales top faces the in opportunistic increasing demand, us then a larger pack are it to use a high as XXXX. set product. retailers sales, is many we particular, merchandise for undertaking top highlighting the as comprehensive disruptions, grow multilayered procurement Rack. XX% levels only flow vendors have our to challenge new constraints gaps, the supply brands are outsized availability. clearance brands want. unique Rack's with chain our in particularly supply portion with at difficult approximately selection same improve environment we a XX% While supply the and brands a to To represented XX when both available, In increase of we system ensure our lower from minimize these buy customers quantities of the we carry of well we allowing to hold coveted we most response, and Nordstrom Year-to-date, as brands of carry hold In dealing inventory gap merchandise constraints. levels executing our of Off-Price source plan actions with in offer or of periods an in to production macro-related deploy relevant tight of the of items

hold of factor increasing year, pack chain strategically and we're inventory that next a by two our Given times three to to into of macro-related our we supply use expect continue and evaluating times. disruptions assortment

well. macro-related we that deal only yield in disruptions, long-term with benefits deliver these that benefits will enhance as We expect areas our sustainable but as chain supply also not will action performance

show of days improving in are inventory these While sales efforts, positively results early positions. with preliminary responding Rack we in the stores

sharper This with Rack, far has of skewed versus mix results than a expected from to AURs decline lower prices the our at declining too factors. XXXX. Second, couple X%

First, customers ours this is of much a at a come product value. of This brands to for strength channel. premium the as off-price great coveted is Rack the scarce in

as those had I described. just haven't supply brands, we However, adequate of

Next, found adjusted add assortment lower far at last as more the certain went year to we price points, that over product categories. in our we too we

with rebalancing the are assortment selling now We and our of selection premium better average increase price brands, to in breadth improved expectations. align customer

Rack's are strengthen drive acting and we to traffic. Third, brand

this As new more Rack in campaign reasons launched we a part effort, of to marketing September.

meaningful increasing Nordstrom read, expanding Rack. expect research awareness consumer levels, in we improving early our top to intent. share brands by selection traffic, encouraged grow a market improve and and and purchase future increase which are inventory We showed our By at in profitability

the we're first the significant more anticipate XXXX. in improvement to in improvement we half follow taking, actions With QX fiscal of with

profitability. to Turning

are cost margin behind those private We and of in streams will pressures. concentrated from our positioning label better flow a have we of Within inventory significant and the closer Pete fixed SG&A, delivering and diversifying improvement of customer. end-to-end to while on to is We response portion improve and our pressure brands. in by increasing those to remain remain opportunities category capacity, various EBIT to inventory visibility we distribution identified overhead better processes factors study found to our as margin plans XXXX, detailed the gaining inventory get work and we mitigating macro-related our and take merchandise and rebased internal that reduction. and And our to Improving chain through and margins committed the business. comprehensive supply priority. it through labor driving our our fulfillment and it pricing, chain centers we're challenges, moves costs, velocity a on you network ways substantial chain, overall our launched macro-related in structure, a fulfillment also in In for In our improvement supply impact across committed carrier throughput supply we managing focused moment. in we've expenses. seen management merchandise the a meaningful sustaining significant

and that driving as increasing drive next-day and shopping while expect customer by Nordstrom and pickup, We in will growth fulfillment. both labor at efficiencies in-store Rack and the selection the expanding speed Nordstrom also same-day and these topline initiatives delivery as experience enhance for well

We fiscal actions the XXXX. of expect these see benefits beginning in to first from half

Turning XXXX levels provided strong Nordstrom banner of third third growth we performance, over quarter. see Southern the of the X% XXXX. returned U.S., in to interconnected capabilities stores, portion sales by Nordstrom located, benefits continued stores and to quarter our digital in strategy. grew are XX% of the Nordstrom improvement the quarter store our third our sales In to where comparable the of market

in in the country's with real of markets. estate been Our highly desirable geographic source us a footprint located has historically top strength for stores

areas disproportionately However, effects the urban impacted have been by pandemic. of the

the our third a our outperformed result, Nordstrom points basis As suburban X,XXX by locations quarter. locations urban in

our The business. a progress we at us, connection in by powerful in event, discussed our areas. are our As delivered important key and most these enabler market increasing and markets digital velocity to making investor convenience winning priorities for for strategic the our are and be continues strategy

a business. We closer the physically drives are strong value across us that store positions the fleet leveraging to and customer

a our products level. greater we and market provide serve at linking assets customers As to better are the by access to result, able

one-day four location times of Our incredible time Nordstrom the shipping provides customers Nordstrom Nordstrom, to a choice. Rack Local and reduction pick at up the product or more in next-day delivers pickup, their market ability strategy that average with orders for available convenience

up Since gain order to brands were In next-day XX% growth continues other showing power XX at markets. XX% traction, stores, strategy versus This the where market capabilities our demand accounted pickup the pickup of two in program. year, top Rack have markets and launched across last we nordstrom.com order quarter, digital evidence orders of platforms. one-third X% the Rack we in for across seen our of of picked our digital at integrating continued our and physical

is our in is The customers interconnected visits. satisfaction our is we channels, their As holiday drives most increase evidence banners multiple the demand as increases of highest Buy across into in model are each order are more is which This Online advantage and profitable advantageous evident see our when taking customer provides turn month, season, our we journey. trend that integrated engaging return encouraged of experience, spend Store points. customers in value pickup Pickup customer It because head touch to dramatically also also services. steady which

and channel. The single those factor services. the alterations shops services that both example, who customer XX to a and connection, across five versus customer of customers the by and as value-added we of utilize average a over spends spend times utilizing in-store convenience online, drive seven personal banners, and For quality increasing a customer don't than such engagement, times styling, offer more

We Rack. increase our Nordstrom across velocity Nordstrom also continue digital to and

drive to XX% improved represented digital sales growth XXXX. business store increased in while QX, over of XXXX, sales quarter, we quarter sequentially. the and continue This third of our over traffic XX% Digital

to business. we we transformation Nordstrom and and like call faster the customers aggressively. be Before competitive our over To foundation express optimism recognize diligently advantages. a has accelerate in core to unique exceptional to our Their move company working of on we'd I thanks turn dedication strong need our the differentiators, future serving are our strategic more and build about and and our and to efforts clear, our transforming to drive the the our Pete, to team.

commitments to we we Rack We our improve turn value taking remain our that, achieve create profitability, build event share. and grow said, for market to performance, I'll and transform our Pete. All to set forth top chain in at are and investor continue profitably supply the to decisive capabilities increase over ability bottom-line it to our steps shareholders. With our confident

Pete Nordstrom

Erik, Thanks, afternoon, and good everyone.

at for discuss the category are specific like for Erik before you as margin better identified our as experience, I'd areas learned overall. we've experience and that opportunity things when getting our we've to private look customer to for make into Through better of a drive management and the quarter. deep you customer third first in and in taken of the quarter category that brands trends As things plans label our areas and the improvement sales performance improvements. said, business well customer, make business a finally, of expected decades better pricing, fourth and these

each using to optimize depth we pricing pace effectiveness end and the to of are markdowns our and of analytics season. promotional product First, at dynamic move the profitably improve

see beginning We work this from initial benefits QX. expect in to

are improve we category our Next, management to process. working

at wallet category data-driven new each role then and customers. category each share optimize role of We Nordstrom We engagement to our the for by and customers customer-centric and are a of the benefit existing assortment and using plays. expanding with Rack Nordstrom define attracting approach

gain We out also most poor efficiency on the productive a editing result. and our performers items, eliminating redundancy by focusing as

selection. for value opportunity see We represent the have of our Group. customers, Nordstrom shared the significant also event you year, more with expanded Notably, private over progress to higher need are margins look on we third-party Product basis sharing label that options opportunity increase merchandise and our the delivering product. investor private better gross the made quarters. control a label with meaningful to recognize brands also brand our than average and our our this earlier forward value We our during our brands We As coming to we efforts label business, our in Nordstrom penetration. accelerate while points XXX us giving our private

Turning category to performance.

continued quarter, and see to XX%, our Home where categories, respectively levels. we strength particularly to sales compared in XX% and pandemic-related This XXXX increased Active,

with posting continues over and designer returning sales in saw We perform shoes, men's double-digit apparel. increase led category handbags a of swimwear by over well designer sunglasses XXXX. signs to increases designer strong travel double-digit with strength and Our XXXX

during encouraged work third events. and gap closing Dresses, a quarter, are also shoes the are customers to sales promising dress levels. to during to that and occasion-based men's makeup are shirts, we the categories return all the trend the sequential suiting We improvement social XXXX in showed improvement signal sequential quarter, with dress and and beginning third

incremental core quarter, certain we capture faster supply result. as the to in We and weren't miss came experienced we and women's as core opportunity as much apparel than such as as back categories able we where in land shortages product stronger responded and expected. needed shoes quickly However, inventory certain increase demand especially but as sales trying in an possible, a by to to categories

anticipation We inventory align are levels in and holiday have of forward working demand. to customer and needs pulled better receipts inventory

quantity both confident much position are balance in season, that we and terms for holiday are categories. We of of a the in improved

within Nordy loyalty As our versus engagement we to percentage sales a we positive trends, X% Club powerful trends encouraged at look and QX penetration program XXXX loyalty driver, customer and are increased program. loyalty remains X grew of XX% by sales. the points

to compared in per customer We also saw increases and pre-pandemic trips spend levels.

our about to look are we continue plans we to transforming QX, excited As business. the

nordstromrack.com are for our customers on and Having QX, in allows more expanding QX to meaningful which sales and we traffic it in platform directly scaling the Nordstrom benefit their partners in financial piloted network, We see nordstrom.com advertise to expect brands. successfully and brand are Media drive our XXXX. to and

count three we can We're preliminary stores a excited announce since assortment our customers. on approach, only industry-leading Nordstrom.com rollout our our to licensed the needs product, on pilot count to in nordstrom.com, be labor. customer advance to in of customers spring. with very nordstrom.com to locations meet This early Fanatics, products. offer are in to the physical build our in with quality we'll and Though With market increase ASOS an evolve access this approximately of a quickly partnership our or alternative choice brands Building offering of launched will over assortment X% XXXX to to we I'm about increase scale. select scale Nordstrom this ability the inventory reads of promising. progress, choice excited a days, without the XX,XXX our total and in-store opportunities percentage sports merchandising nearly XX-something month. partnership high ASOS we at also customers partnership. world broader two choices demonstrates corresponding have share gained in expand and with partnership better owned new ASOS that points increase our on and our are Fanatics Fanatics. We'll are ASOS XX% As to models total have We sales new pleased will today. this now launch where partnership buy stores on

event customer investor analytics insights count record We February, assortment. present expanding we'll a our with at share continue customers. existing new expand and curated, and our both customers significantly our gain count, greater and our in choice are QX enhance heard high using you with relevant we entered As to choice attract wallet to selection to

lot holiday With our excited and expansion to right in customers and expanded learned online. And work, leveraging Fanatics assortment the time. and Through For count choice and the from digital of convenient to and offerings in-store of to our services gifting. stores our to the place and the customer analytics it for assortment analytics offering as we our turn enjoyable gift and To drive to with our the sales I'll we're customers. where our shopping of ASOS. integrated data-driven results. plans In right decor that experiences opportunity and partnerships from provide platforms insights and we holiday we're put well compelling drive holiday delight the that, both dressing, combine with discuss with festive to as holiday about we make significantly sale, network that anniversary season, we shops, we holiday art have excited are performance, right innovative gifting newness response, a expand Anne easy closing, our in use over featured to our showcase learnings gift and at merchandising and financial

Anne Bramman

XXXX, one increasing results, the week Pete. Nordstrom anniversary sales as third challenges Thanks performance of to team and you XXXX. the like timing QX. X% specific the points. quarter market driven is capture improvement spend sales our fiscal take store roughly XXX sale third quarter to falling inventory Rack shift per improve of begin improving review in I'd net negatively the trends, our positively as with returned by sales compared X%, period approximately the actions traffic sales then third approach to to of taking Off-Price a same with The quarter XXXX basis to Nordstrom and into performance. decreased by through Overall, Rack's quarter in Erik in levels impacted flow And customer. share procurement store mentioned, sequential declined banner sector. and the impacted

online for recover. store and our serve sales continue even continue the traffic digital front, customers' we strong Nordstrom with On as to experiences digital desire growth to shopping

reaching XX% the the higher compared sales holidays. the with period continuing with anniversary with new buying support and third in billion. in represented Ending backlogs and XXXX, increased same is our points compared as XX% supply over adjusting to the of inventory leverage basis we inventory sales the exciting For holiday current primarily anticipated XX% costs inventory fourth due receipts to quarter a percentage In-transit and timing period merchandise earlier fiscal Gross quarter, fiscal increased in forward our the product sale, XXXX. digital majority quarter, for the increased XX occupancy after product address demand. of $X.X chain of for Entering net and same the increase the margins. XXXX in as pulled profit

anticipate and a we elevated ahead, to we invest period the as levels points Looking meet products hold net customer basis in compared of the as Rack. position for the percentage to same demand fiscal end sales fiscal year of and inventory increased SG&A Total through XXX the pack XXXX. in inventory

fulfillment As cost continued from partially macro-related resetting XXXX. structure in a result of offset benefit labor continued by cost the and pressures,

Now, for turning to of year. our outlook the remainder the

heard products great our we're serve fourth about of holiday for quarter excited with both plans online. in-store and demand, a experiences you've and As compelling selection to the today,

to year for improvement outlook the the increasing will and spending. of the Our drive assumes continue economic remainder consumer mobility

the Given are for XXXX. plans we our performance continued reaffirming quarter, in third fiscal line our quarter in progress with for and fourth expectations guidance

We improvement to QX. projecting XXXX, of and versus we topline QX more slight expect fiscal are growth XX% from still revenue than sequential

our on compared EBIT for year. XXXX. quarter approximately to margin I'd fourth like to color full of the a We X.X% deliver to to bit X% expect provide of forecast

the and of promotional reflecting higher quarter, For this sell-through margin quarter fourth year. gross the forecasting regular lower of we significant activity are price XXXX, the improvement versus fourth benefits

related that costs QX, an charge fulfillment fourth expect SG&A labor We impairment similar that we will this quarter pressures after experienced quarter continue SG&A in in to in deleverage excluding primarily and the recorded resulting to of what XXXX. we

now and we business. in the priorities X% X% supporting to at supply capabilities. with first chain on to an We're with emphasis of levels capital investment Turning our allocation, committed capital remain our priority being ongoing to expenditures planning technology normalized

priority is our second reducing Our leverage.

a and through to this remain our improvement are to investment-grade ratio and earnings debt end of times for a an two to times approximately credit and of leverage decrease the rating the end year XXXX We combination on approximately and three committed for track of half reduction.

is expect priority to to third shareholders, do the a Our we returning position to continue by cash of and be to the year. so in end

As quarter results and with as greater deliver well you've goals Nordstrom as growth strength our on investor to targets and third strong we of We several greater XXXX heard today, operating improving improvement. progress some stores in commitments areas trends margins for set than delivering than digital billion. made $X show and our our remain our banner our fiscal pockets event, track X% toward EBIT flow cash annual forth the and

earlier, urgency. and said as and optimize Erik we are across to we medium-term These profitability deliver acting the on way platforms drive cash with need scale. of more, a flow a we we to sense share, grow delivering recognize As greater and step that targets are

the our in path like our and We excited of are now turn it future for over I'd Q&A. confident Heather to forward business. about

Heather Hollander

Anne. you, Thank

Q&A responses session. limit ask Q&A, move one to and to participants We'll follow-up. the we their to question started we Before with get one the now

Operator

first is Instructions] from with Saad question question. [Operator with you. your proceed Evercore ISI. Our Please Omar Thank

Omar Saad

and talk external in between taking to Rack on in try Rack I'd Maybe the weight dive opportunities other also internally -- didn't could And the helping the challenges and business. buying factors business things of to analytics why Maybe that for you inventory for little platform, out the getting be? deeper Thanks like better about to all question. isn't surprising. market improve be evening. guys love you Good better it my digital business? the platform, this merchandising, be, It enough help talk you inventory that that premium built impacting sounds do bit to you maybe the great can comes you needs Thanks. and inventory -- could data local and about omni-channel at have versus merchandising you placing the It's ecosystem where to understand market brands. a it right you that model. and maybe needs to us

Erik Nordstrom

everyone on Thanks I external Omar. Rack, those. certainly put Erik. The dealing it is This mean with is but I'd internally. there's headwinds,

of as we not to. goods. and in as particular, need have with We starts responded With aggressively really source quickly it as Rack our

Our premium all our the a price also to prices. of of and Rack. brands and flat the with order, source resulted our Rack talked inventory. inventory is shortage significantly brands These of which having to it we really year. not in customers We've point be mix top Nordstrom great resulted the remarks great got top on that gets We've to fallout prepared the both at our in which in had under disrupted brands of the out of quantity brands, goods higher been it's tend excited plans that in brands issue, lots pandemic, Banner, they know just our of about come but in juice our

advance. brands too underway haven't We of we've Added that. been, to with that. enough working I product which just making we both we to are flow to there's got are further these also top is get slow our adjustments, And a get to A, B. key think, the And categories had points to need. adjust it is to that, of little it's can't customers for, that commitments from asking Brand But if and price that Brand oftentimes, go in we and

So, we're that. working on

which issue our AUR. is Another related is

Again, wants. customer X%. down put premium does Not being brands. lot these that our the operations, price a pressure top what of the only just average on it isn't wants Our customer

mix operations customer pressure skewed been of a lower as our price that's little on our lot so well. a more our than and has And wants,

this, there's but external So, that things start lot yes, of our are a control. factors these within

the fixed, second get To placement, driving market the strategy most has from and market inventory our do address been the Rack and that. Rack Banner right our these absolutely to from pronounced about banner. things. our is get to It and have this issues. much data we capabilities our this talked question, at plan your We path inventory on We're Nordstrom your omni than think question, strategy a the I will banner we've about more for determined

we Banner, in data helpful. our helping we've that and to our have that is strategy, as Nordstrom Rack as us to for the We So, orders. market for started do multi-channel pickup really link a or set it's been data have point nordstrom.com stores is customers, which

So, from set both of we stable using but little sources been become we've lot a are coming the -- it, as and our customers location more benefit want predictable, continue data see some content our business leverage our the we get we seeing benefit of quantity and analytics our want serves and also best. as and more and to ahead, to apply goods a inventory we out the need that

Omar Saad

Thanks.

Anne Bramman

Erik in as just that Omar, about some we've comments that this going Rack key on to opening the forward. in in his the reads seeing on some brands. been is of and the us on some improvements of about add early Anne. the through wanted key We're I this talked this inventory the progress business flowing on some is the of of the optimism momentum gives areas quarter

actually we're early, some still So, that. while very positive from impact seeing

Omar Saad

Anne. Thanks

Operator

KeyBanc is proceed Please Yruma Next Capital Markets. question. with Edward with your

Edward Yruma

be can SG&A or and of do are some remove you you investment higher as it's And just SG&A guys out think about to an cost of year. guys of some lot wanted to this ask Thanks. then think Hey, the Thanks question. been I follow-up and the rebuild about SG&A repositioning, last repositioning did is term, know a I think on good to pressures. is And where I you incremental SG&A. layers leverage there's afternoon. understand an that, topline? needed? took medium really been from higher the taking due a about I perspective area incremental as But guess, driving for there you will Rack just you reliant

Anne Bramman

that Edward. first little the the and Hi I about can you base and then on I'm to take then want one SG&A, well. a going maybe Erik, talk I bit think Rack as

the general, expenses, did fixed take a we So, cost just in in portion of significant on XXXX. expenses out

We term forward our reduction track continue take to actually The medium permanent cost to SG&A that to out really I the year, of in the structure. we and target believe the add-back short on bigger going see the slightly this ahead over be of of line. of would been -- cost what $XXX are has million favorable and will on

So, then top center supply with costs. costs well wage as seeing distribution chain our we're some of pressures that, in that and stores as shipping and on the really of it's about freight

of we're number not to context working that. examples offset a so around And through a that actively but through topline, of those, of is really couple let levers some just employing. And and me give you

well visibility we've better then to chain We're some that about end-to-end on improvements made really now talked touches that supply our to the we inventory start we're on our its scaling doing margin about, really In the pricing, season which levers component a in number investments through really we're have already to end ecosystem. gaining that out. around diversify variable pulling the there both seeing of most it's seeing profit the our we in chain, out in results getting called markdown we go getting of that fewer that as expect right look As as we've and headwinds a private and of of care capacity, reducing merchandise number scale we're in the Erik We're in network, are as product are pickup cost on Coast. at offsets a just the really West Pete to our and of and the general lot making the some order we're our two areas XXXX, improving all of supply platforms. that label ensure our brands. processes sell-through Those

very progressing on optimistic we're So, about how we're this.

Day As future. help not you've heard that as targets our the get it about of and got can think this a that streams in underway Investor believe to long-term comments, we've work us only that as lot will beyond well the after go we opening achieve

to So, Erik, in about for the SG&A going talk I'm investments Rack.

Erik Nordstrom

Yes, have for our channels. Rack, we two

a demand, rack.com. for And making We've in there. there. lot We been We digital our there's contribution have a big know much and Off-Price product online investments not particular, there. competition margin channel really rack.com, to in improve there's of is

of to been we've platform We that our investments year, off there and integrating are we're paying that. see rack.com making some on been and starting end. on the nordstrom.com the this has So, back earlier from got benefits that

there's of We what store do We to we opportunity get need our stores know of to growth. We right our see a our them, side, money invest that we stores short-term have issues how we to comp But think add after focus is opportunity going. store the On fix before now in a to channel. to lot lot there. that get but know are. some

Edward Yruma

you. Thank

Operator

Advisory with Dana proceed Telsey is Next Please Group. your with Telsey question.

Dana Telsey

afternoon. Good

enhancing as supply you. the XXXX As you look of chain -- where we being guidepost do the and want you takes through this able the get of full should at to you of we Rack puts and move what supply both the How chain be and see the as for as into the optimization, looking we look for optimization businesses? Thank XXXX? line inventory different elements

Anne Bramman

for thanks Dana, So, the question.

like we're to strategy inventory number serve how using their customer the at we available purchases quickly on the and enhance as of can customers of to just it. through the for in assets side, things and on each enhance that the mentioned, really markets pickup get to we things cost can is experience as to a XXXX but measure, not as as how think piece As customers we're possible I that time we as quickly we as are getting the XXXX, also order and looking there our market far increasing --

So, we're going well. the our expect improvements get also going also about the do we to we on And to that of overall supply platform piece takes, and puts see chain. to expect we as leverage for forward the from to SG&A of in to that, some cost well. reducing as some the see optimize continue but to really on We're that. And side going headwinds talk continue

Erik Nordstrom

delivering I it is big sales. close our of the strategy. good real orders able We're times at continue nordstrom.com to. Rack. have levering Dana, of seeing we're the selection which a next stores and up that top I XX part our And And market. years to our We in add. day you scaled to pickup product to Online, Adding be is product strategy is as results for more as Pickup next-day several XX% point a Rack, And from our for now just a is orders. one-third of as the customers that, pickup our to think, that seeing Store being We're our four the And leverage markets, customers. Buy our picked work into Rack we know, market

And Our one-day X% markets, our demand a is XX% versus -- had in reduction our average in is top other XX accounting for markets. shipping already. time our order pickup digital of

points proof see are of only So, that not type the the a should placement. strategy, inventory optimize in market optimize as you there particular, point but those to is seeing of our points, but we we're our continue proof lot

Anne Bramman

to the We finish flow with as will comments want believe of still I headwinds of opening just be talked as as I just Dana, do then up on going our far investments some inventories bit of little conversation context. continue in. the coming inventory in it to in give we to a And there's about

our some receipts that expect and as we're QX. the efforts pull spring and for example we we pull of make that at we've we QX, we'll holiday, time So, to customers. taking QX sure holiday see did that, right again that of for do product forward the got receipts, to the to to inventory An ensure right forward for

and Rack up it Additionally, seasonal that are space, we've it's really believe in through. products out packet it got will we in investing can in little holes, we smooth a particular, supply the sure hold then pull one-time to making investment that the chain disruption. and -- we great be about But customers

Dana Telsey

luck. of Best you. Thank

Anne Bramman

you. Thank

Operator

Chen Please question. proceed with with Oliver Cowen. your is Next

Oliver Chen

Hi. you. Thank

you but advanced are how sounds this a would Regarding about had this the think on door what now pretty know why thoughts past? you where remarks, also it it Rack contrast versus strategy prudent effectiveness? and what's have you you I think you promo the I as and your price your love out less digital earlier? the relative prepared analytics in I pack hold, so in And ahead, is happening prudent, would to using you called do opportunity? platform. aspects see which

So, what and/or effectiveness promo you. hanging where happened with Thank is the lower fruit?

Erik Nordstrom

with for saw from we've customers buying share to share off-price to going on start are price the Yes, that grow product. first particular our question, strategy. and premium been we but I'll priced of year retailers in who the in stores question lower opportunity wallet product of Rack Oliver, other us, Yes. there the a store Rack

lower-priced we brought and priced the year. for. So, too brought in Frankly, in not lower looking We went product some more heard we've they're customers we over from is did that far. categories have product bring what

hot in we customer that from but stores, we know kind have the performance is acquisition, overall, good everywhere. Now, hot also price our of seen stuff particularly

So, sweet an $XX market to access our sell category, it stores. is a spot, have in should that all mean example stores we that in really in brands I not coveted all use our can't we is having be handbag lot and handbags. brands. $XX, our The And

have. had to difficulty to that added there that So, lack adjust was strategy really to receiving product the been a brand we What's that surprising premium not their was us of new we've the it's effort. normally a merchandising

before. of getting hold on product up we and price a brand So, should have, which somewhat going where not AUR the question the ordered done the and pack pack situation premium your to related that strategy kind product the ended we on compounded to much In and We've than too flow hold. we with having lower when It pack years a us more opening pulled we store the the particular, we time. fine of was we our quite and on on stores. of have ago, store did at which we a when hold, these really Rack back couple helped back openings bit were aggressively and of openings pulled for it right goods flow

the Our just it products brands to with year, pack are in goods do level in disruptions that and the given supply brands can disruptions holding that the they supply brands and that these that we have. hold the do to into what work away that product. source smooth of product had we're because some to and that seems They this of where in one chain, and is gone and going goods, we price to to particularly react more given These have we pretty the obvious could packing continue short-term that our to inventory will really that's we from the And same adjust going had next of pandemic. we're have our do channel, premium we at full believe the these and short-term during not buys have flow. out us normally

Anne Bramman

answer do want you Pete, And to question the on promotions.

Pete Nordstrom

sure. Yes,

the relative that markdowns, effort heard timing mean make way see to there is into a depth surgical markdowns to of this. how on markdowns, feeds about us to data-first data more a it's doing what you've digital and leverage we're a with to our I And So, before, of job do related from how to us approach in I a a what of you're approach maximizes that to going both kind in think I talk mean that's better really and more will we a methodology I piloted kind we is fruit approach that, version to that. goodness know something something But of we lot think a think apply that of that that step of that more I positively. but profitability can worked taking can I there's a and believe obvious, and analytical the come that broadly, from sounds been that we've profitability. the that on and past, our and extra always affect bear will to we take think

Heather Hollander

question. one for time have we Alex, more And Okay.

Operator

Thank you.

from Altschwager with question. Please your with Baird. question last comes Our proceed Mark

Mark Altschwager

Thanks here. up following afternoon. I Rack on squeezing me in for the guess, investments. first, Good

look and market availability rebalancing? to Rack brands chain are or investments with just at there merchant consistent you teams strategy. contemplated of already product in is growth you what's needed this about it longer sounds broader type there term? some changes the Or As and the incremental in to are like guess needed rebuilding drive I want broaden points, supply beyond flexibility increase the price in and

Pete Nordstrom

Yes, this is Pete.

time I to that. with allowed the inventory in biggest type with a you if to it make these able unfortunately just-in-time is us hard do think relationships to short pandemic everything that years. that what in really pandemic to the And the Erik in was be upfront, Having a do a of to a we position And the good planning. thing happened able we as for to great of lot at-once react buys premium be be our lot brands model, that. of is learned known the those really through it we've affected didn't Rack mentioned has do

planning sure had to and approach out got have So, in. balanced inventory I we from think making that, we've at be and we've learn to better that flowing more the a

there's an strategy. hold, the will brands, application same is label own be which for our pack a good with with as that's us. for that heard That well. the and true And mitigating Rack You in

we'd evolved. time and it. think to a really our has well changed the done change and rocked for along long got and We had that So, I playbook landscape with

and improvement having right we're and start with of away expect sense it's much we forward we days great and to on urgency, this sure. determination a So, look better to taking that had we too for

Mark Altschwager

if a And for implied year? we you. there mid-single-digit that should factors could of Anne. follow-up fair thinking quick I be other is growth we after be considering? you. think roughly model And baseline ask targets to Analyst Thank about XXXX, I trajectory next are out a type Day as Thank Or a the

Anne Bramman

to got What levels. XXXX of at giving stage. will XXXX context that we're the Hi once particular give investor Mark. little this bit I were to so, Yes, is to you we guidance say a as this targets really know, not topline

-- it we the our are range Investor to think, imply look have in getting rest it, that the target we're you corn at I pretty back if And in look it where you for when back a that Day certainly with at the general, X% will would that we to given into year, -- this you we've of also as topline. close goals XXXX flat if different well. would guidance back to that to get you also it of

I and goals getting the those well when a And that color path look you you commentary out QX, at that. next commitments our that more making, you we'll it certainly made of would at we're So, think, we have We're look medium-term if provide lot call. have implied progress on there. we

Heather Hollander

Thank our the presentation website. slide want available for will and to today's for one for joining replay, with year along prepared A you on We in you interest thank remarks, Nordstrom. Okay. call. your be

Operator

teleconference. today's concludes This

your this your for disconnect may you time. lines Thank You at participation.