Nordstrom 2005 Annual Report Download - page 22

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
Nordstrom is a fashion specialty retailer offering high-quality apparel, shoes, cosmetics and accessories for women, men and children. We offer
a wide selection of brand name and private label merchandise. We offer our products through multiple retail channels including our Full-Line
‘Nordstrom’ stores, our discount ‘Nordstrom Rack’ stores, our ‘Façonnable’ boutiques, our catalogs and on the Internet at www.nordstrom.com.
Our stores are located throughout the United States and we have 32 Façonnable boutiques located in France, Portugal, and Belgium. In addition,
we offer our customers a variety of payment products and services including our loyalty program.
STRATEGIC INITIATIVES FOR 2006
Our long-term goal is to deliver industry-leading performance, and we continue to focus on driving top-line growth, gaining operational efficiencies
and developing leaders for future growth. This mindset has served us well over the last few years as we have generated same-store sales growth
and improved our gross profit and selling, general, and administrative rates. Our 2006 initiatives maintain the same focus but also recognize the
developments in our business and the marketplace.
Drive Top-Line Growth
Our top priority is to gain market share through existing stores and channels, as well as from new Full-Line stores. Our success in accomplishing
this goal starts and ends with the experience each customer has in our stores. We believe the essence of this experience is desirable products
coupled with personalized service. Our ongoing focus revolves around these two key elements of our business as we believe they are an integral
part of long-term success. For 2006, we have identified three specific areas of focus to drive top-line growth: re-energizing women’s apparel,
multi-channel integration and enhancing our designer business.
Women’s Apparel - Women’s apparel represents about one-third of our total sales and serves a wide range of individual tastes and styles.
In 2005, we started to develop more targeted merchandising strategies for our women’s departments. A thorough analysis of objective customer
information combined with the feedback from our selling floor has helped us to better understand our customers’ needs and shopping priorities in
terms of style, price, fit and occasion. We have carefully reorganized our merchant teams and are in the process of fine-tuning our offerings to
better serve our customers.
Multi-Channel Integration - Our goal is to create a more integrated, consistent merchandise offering for our customers, whether they choose to
shop in our Full-Line stores, on the Internet or through our catalogs. As described in “Multi-Channel Strategy Execution” on page 6, we initiated the
integration in 2005. In 2006 we will begin migrating the Direct inventory system onto our Full-Line store platform, creating a “one-company view” of
inventory resulting in a more seamless merchandise offering and experience for our customer. This process is expected to continue through 2008.
Designer – Our women’s designer category has been a strong performer and contributes significantly to the aspirational nature of our brand.
Our goal is to have a complete designer offering in at least one store for every major market we serve. In addition, we are focused on enhancing
and aligning our designer offering across all major merchandise categories. In August 2005, we purchased a majority interest in Jeffrey, a luxury
specialty store business with stores in New York City and Atlanta, and named the founder, President and CEO of Jeffrey, Mr. Jeffrey Kalinsky, Director
of Designer Merchandising at Nordstrom. Along with our merchant team, we’re utilizing Mr. Kalinsky’s expertise and creativity in the designer
business to further our current designer strategies. Additionally, we launched a designer Web site in February 2006, which offers designer apparel,
footwear and accessories.
Continue to Gain Operational Efficiencies
As we ‘drive top-line growth,’ we seek to expand our gross profit and reduce our selling, general and administrative rates by minimizing the
increases to our buying, occupancy, general and administrative costs. This approach has been successful over the past three years, as we have
controlled these costs while we supported our same-store sales growth. We are committed to keeping our technology investments current and
relevant to our business needs. This includes investing in ongoing maintenance and system enhancements as well as replacing older applications
as the opportunities present themselves. This is an ongoing part of our overall technology investment strategy. We anticipate additional rate
improvement from our buying and corporate organization as we enhance our processes and expand the use of our systems to support our
future sales growth.
Leadership Development and Succession Planning
At Nordstrom, we are committed to developing the best talent in retail. The training and development of our future leaders is critical to our
long-term growth. To that end, we have identified potential successors for all major leadership roles. We have also piloted with 35 executives
a leadership development program designed to increase specifically identified leadership skills. This program includes identifying each leader’s
development needs and includes personal coaching as well as interactive group learning. This program will be rolled out to approximately 90
leaders by the end of 2006 with plans to train more individuals over the next few years.