Financial Aspects of Nordstrom Inc.
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Nordstrom, Inc. is a fashion specialty retailer, which has been operating for more than 100 years. The company started its history from a small downtown shoe store. However, nowadays this retailer “enjoys a healthy financial position – $1.3 billion in cash on the books, 11 straight quarters of comp-store sales increases, double the industry average of sales per square foot and the No. 20 position in Apparel's Top 50” (Speers, 2012). Therefore, it is very important to analyze investment opportunities of the company.
According to the website of Nordstrom Inc., the key executives of the company are Blake W. Nordstrom (Principal Executive Officer, President and Director), Michael G. Koppel (Chief Financial Officer and Executive Vice President), Karen McKibbin (President of Nordstrom, Canada), James F. Nordstrom Jr. (Executive Vice President and President of Nordstrom Direct) and Erik B. Nordstrom (President of Stores and Director). Executives’ profiles demonstrate that they all have outstanding work experience and qualifications (Corporate governance).
Experience of the Financial Leader
Chief Financial Officer of the company is Michael G. Koppel.
“He has more than 25 years of experience in accounting, financial planning, and operations in the retail industry. Koppel joined Nordstrom in 1999 as corporate controller and was appointed chief financial officer in April 2001. …Over the years, Mike’s industry experience has included financial reporting, regulatory compliance, strategic and operational planning, treasury, P&L controls, investor relations and information technology, along with other key financial and operational functions. He has served in a variety of finance roles at several organizations including 13 years with May Department Stores and its subsidiaries” (The Wall Street Journal CFO Network).
Current Company Performance
Nordstrom is a fashion specialty retailer offering high-quality apparel, shoes, cosmetics and accessories for women, men and children. The company’s stores are located in 30 states throughout the United States. In addition, Nordstrom Inc. offers the customers a variety of payment products and services, including credit and debit cards with an associated loyalty program (Annual Report, 2011).
In 2011, the company achieved the record total net sales of $10,497, an increase of 12.7 %. Therefore, Nordstrom Inc. has been developing e-commerce. For example, it began offering free standard shipping and free returns for online purchases and did limited testing of the same-day delivery. Besides, Nordstrom Inc. improved its website and mobile website. However, it continues to develop traditional commerce. For instance, the company plans to open new Nordstrom full-line stores and Nordstrom Rack stores (Annual report, 2011).
The company faced several business risks. Firstly, it sells high-quality shoes, apparel, cosmetics, accessories, which are discretionary items for many customers. Therefore, the fashion retailer depends on the economic conditions in the country and in the world. For example, during economic downturns less people shop in their stores or they may spend less money. Therefore, it will lead to the increased marketing and promotional spending, aimed to increase demand. Secondly, the fashion specialty retail industry is highly competitive. The company competes with other national, regional, local retailers that can provide the same kind of service. Thirdly, a retailer always needs to anticipate and respond to the customer preferences and fashion trends. It has to make decisions regarding inventory purchases well in advance of the season in which it will be sold. If the company fails to that, it will possibly lose some current customers (Annual report, 2011).
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According to the annual report (2011) and the news release (2013), Nordstrom had increase in all aspects in 2012. Firstly, Nordstrom achieved the record net sales of $11.8 billion, which represented an increase of 12.1 percent compared with prior year net sales of $10.5 billion. The full year same-store sales increased by 7.3 percent on top of the last year’s same-store sales increase of 7.2 percent. Secondly, earnings per diluted share of $3.56 increased by 13.4 percent compared to $3.14 billion for fiscal year 2011. Net earnings of $735 million increased by 7.7 percent compared with net earnings of $683 million for fiscal year 2011. Thirdly, return on the invested capital (ROIC) increased from 13.3 percent to 13.9 percent (Seeking Alpha, 2012).
In addition to that, Nordstrom Inc. demonstrated financial growth not just in comparison with fiscal year 2011, but also during four quarters of fiscal year 2012. For example, the total revenues were $2, 629 million in the first, $ 3,009 million in the second, $ 2,808 million in the third and $3, 702 million in the fourth quarter. Net income was $441 million in the first quarter, $613milion in the second, $683 million in the third and $735 in the fourth quarter (News releases, 2013).
The annual report of Nordstrom Inc. demonstrates that the company has growth in all aspects. Despite stable position on the market, the retailer continues to apply different innovations, especially in e-commerce in order to make shopping experience easer for a customer. Besides, Nordstrom Inc. plans to open new stores. On the other hand, this kind of business faced some business risks. Firstly, it depends on the economic conditions, because goods and services that they offer are not essential commodities. Therefore, if customers face economic difficulties, they will buy less company’s goods. Secondly, it is very competitive business. Finally, the company should always respond to the clients’ tastes and fashion trends. If the company fails to do that, it will have financial losses. To sum up, I would invest in Nordstrom Inc., but my mark would be nine out of 10 due to instable current economic situation in the world.
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