Nordstrom Inc. (JWN), one of the largest fashion specialty retailers in the U.S., plans to further expand its Rack concept by opening a new two-level store at The Newbry in Boston, Massachusetts. The store, scheduled to open in spring 2013, will include a wide selection of apparels, accessories and shoes of the Nordstrom Rack store.
Nordstrom Rack store is an off-price retail format of Nordstrom. It sells the company's off-season and clearance goods from its mall stores and Nordstrom.com, at a discount of 50-60% on the original price. Rack also showcases apparel, accessories and shoes, which are specially purchased for Nordstrom Rack at a discount of 30-70% on original prices. The Rack concept is specifically designed for customers who appreciate the brand but cannot afford it due to its higher pricing.
The new store, spanning across 38,000 square feet, will replace the former Filene’s Basement space and share the building with tenants, such as Boston Sports Club, Citigroup, H&M and Victoria's Secret. The company already operates 4 full-line and 3 Nordstrom Rack stores in the City of Boston.
Owned by TIAA-CREF and managed by CBRE/New England Partners, LP, The Newbry building is located on Boylston Street, which is one of the busiest traffic centers in the city. Nordstrom expects the location to help it attract customers residing in downtown Boston, commuters and tourists.
In June 2012, the company has also announced the opening of two new Nordstrom Rack stores – one in hometown Seattle, Washington, and the other in El Paso, Texas. The Seattle based store is expected to open in November 2012 while El Paso store is expected to start operating by the fall of 2013.
Our Recommendation
Nordstrom’s latest store openings signify the company’s commitment to expand its store network with the aim to drive its top-line growth. As of August 2, 2012, Nordstrom operated 117 Nordstrom full-line stores, 110 Nordstrom Rack, 2 Jeffrey boutiques, 1 treasure&bond store and 1 clearance store, thus bringing the total store count to 231.
Moreover, the company has targeted to open 16 new stores in fiscal 2012 consisting of 1 full-line store and 15 Nordstrom Rack Stores. The company has also planned to add 24 new Rack stores in fiscal 2013 and intends to operate 230 Rack store by the end of 2016.
Nordstrom, which competes with Gap Inc. (GPS), currently maintains a Zacks #2 Rank, which translates into a short-term Buy rating. However, our long-term recommendation on the stock remains ‘Neutral’.
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