Nordstrom aims for 20 billion dollar sales goal

While Nordstrom may have seen a mixed earnings report last week, with a profit of 255 million dollars for the quarter that ended January 31st, down from 268 million dollars where the company was at during the same quarter last year, this has not discouraged them from setting their sights high. The company has announced that it is aiming for a whopping 20 billion dollars in sales by 2020. This is by far the largest sales goal set by any fashion company perhaps ever.

After earnings took a decline in 2014, and while specialty stores and fast-fashion stores are proving more successful than department stores right now, hence the expansion of brands like Michael Kors and Zara, Nordstrom is confident that it will see some reputable profits in 2016. One of the reasons making Nordstrom so confident in its success is the brand’s expansion into Canada, as well as the continuous openings of new Nordstrom Rack stores across the country.

When news broke about Nordstrom’s decline in profits last week, Nordstrom’s Executive Vice-President and CFO, Mike Koppel, decided that Nordstrom would have a target of 20 billion dollars by the year 2020. While some might view this number as farfetched, it is not totally without reach. The brand is also taking all the right steps to ensure that their company will see high profits over the next five years. In addition to their expansion into Canada and increasing their number of Nordstrom Rack stores the brand has also invested heavily into their much talked about New York City flagship store coming in 2018.

Nordstrom hoping to be a 20 billion dollar enterprise by 2020

That’s just the beginning, however. Other plans under Nordstrom’s profitability belt include selling their credit card business, and further investing in Trunk Club, the online personal stylist web channel for men that doubled its sales last year and is projected to double their sales again this year. In addition, trendy retailer Topshop plans to increase their presence in Nordstrom stores from 50 to 80 by the end of 2015. Despite the dip in sales last year, Nordstrom certainly looks like it is on the right track.

However, while the expansion and investments in new stores and technology will help the retailers profits in the long run, in the short run it will deplete its earnings. The estimated loss before interest and taxes is accounted for in Canada after their expansion is projected to be about 60 million dollars, compared to 32 million dollars last year. In regards to Trunk Club, they are expected to cost Nordstrom 30 million dollars compared to 25 million dollars last year. Of course, as the old saying goes, “You have to spend money to make money.” Nordstrom is currently projecting a comp-store sales growth of 2 to 4 percent in 2015, per share profits from 3 dollars and 65 cents to 3 dollars and 80 cents, and a 5 to 15 point basis decrease in profit.

The real secret to Nordstrom’s success, though, will be e-commerce. While brick-and-mortar chains are struggling, that doesn’t mean retail is suffering in general. Nordstrom has seen a much higher than average 18 percent of its sales coming from digital operations. This is helped by nordstromrack.com, and their other discount retail web channel, Haute Look. The company is currently planning a new distribution center specifically for e-commerce orders to cut down on delivery time, as well as increasing the assortment of selections offered online.

While a 20 billion dollar sales goal is no easy feat, Nordstrom seems poised to hit their mark by 2020. With multiple new retail stores, and plans to dominate e-commerce they are on the right path to becoming one of the most profitable department stores in America. While they will face tough competition from competing retailers, like Neiman Marcus Inc., who is also eyeing setting up shop in New York, and is working to increase Bergdorf Goodman’s sales to 1 billion dollars a year, and Saks Fifth Avenue, who have their sights set on a new downtown location, and renovating their midtown flagship store, they will sure be giving everyone a run for their money. All eyes are on Nordstrom for 2015.