A Nordstrom Rack branch.
Insider/Brittany Chang
Once considered the company's greatest asset, sales growth has slowed at Rack in recent years.
Analysts say Rack has an inventory problem and suffers by being connected to a full-price brand.
We visited three Racks to find out more.
Just two years ago, Nordstrom's discount chain, Nordstrom Rack, was considered to be the company's biggest asset, outperforming and outgrowing its full-price business in sales and store locations.A Nordstrom Rack store in Madison, Wisconsin.
Insider/Dominick Reuter
But increasingly it has become a lag on the company's earnings, reporting an 8.1% drop in sales over 2019 in the most recent quarter, while its rivals TJ Maxx and Ross Stores continue to thrive.Rack sells discount goods.
Insider/Dominick Reuter
Analysts say the store has become chaotic and overrun with inventory. Nordstrom didn't immediately respond to a request for comment.Chaotic shelves in the toy department.
Insider/Dominick Reuter
We visited three Nordstrom Rack stores in two parts of the US to find out more about the shopping experience.Handbags galore.
Insider/Dominick Reuter
Our first impressions of one of its stores in Madison, Wisconsin were good. Clothing racks were neatly organized and employees were actively keeping displays in check.The store was neat and tidy.
Insider/Dominick Reuter
There seemed to be a good assortment of recognizable brands and the selection wasn't overwhelming.Kids shoes.
Insider/Dominick Reuter
Still, some of the clothing seemed to be well out of season. Handy for those hitting hotter climates but less so for locals taking on the cruel midwestern winter.Clothing racks were brimming with summer clothes.
Insider/Dominick Reuter
Next, we headed to a Nordstrom Rack in Manhattan's Midtown district.Nordstrom Rack in Midtown.
Insider/Brittany Chang
The store is close to the busy Herald Square shopping area, key tourist attractions such as the Empire State Building, and a ton of offices, meaning that there are lots of different customers to appeal to.Handbags were neatly arranged.
Insider/Brittany Chang
Our initial impressions were also positive. Commonly messy parts of the store were kept in good order.Shoes racks looked tidy.
Insider/Brittany Chang
And there seemed to be an appropriate amount of inventory on sale, without racks being overstuffed.The denim section.
Insider/Brittany Chang
Some of the signage in the store didn't match the clothing on offer, however, possibly indicating that the store is using different items to cover up inventory gaps.Nordstrom executives have been upfront about the challenge of securing inventory right now.
Insider/Brittany Chang
A ton of winter clothing was on offer.Fleeces and jackets.
Insider/Brittany Chang
And we spotted some well-known designer brands…Rack promises to offer discount prices on premium labels.
Insider/Brittany Chang
…as well as more generic pieces…A less exciting assortment.
Insider/Brittany Chang
…and lesser-known labels.We didn't recognize all the brands on offer.
Insider/Brittany Chang
It didn't necessarily feel like you were getting the most exciting assortment of designer brands.Women's apparel.
Insider/Brittany Chang
Next, we headed to Nordstrom Rack's Union Square location. This definitely felt more chaotic.Rammed racks.
Insider/Brittany Chang
A mismatch of clearance items was jammed onto racks.These items looked to be leftover from last season.
Insider/Brittany Chang
And the displays were more disheveled than in other stores.Designer handbags piled up.
Insider/Brittany Chang
Still, it was fairly organized for an off-price store where customers are likely to be riffling through the racks to find the best deals.Off-price stores are often messy.
Insider/Brittany Chang
We spotted some well-known brands…Nike shoes.
Insider/Brittany Chang
…along with designer labels…Guess winter jackets.
Insider/Brittany Chang
…and trendy millennial brands.Ganni is also stocked at Nordstrom.
Insider/Brittany Chang
GlobalData Retail analyst Neil Saunders has blamed the store's current woes on the lack of discipline in its buying team. "It's almost as if Nordstrom just acquires lots of stuff, which it then shoves into stores," he told Insider.A ton of coats.
Insider/Brittany Chang
BMO Capital Markets analyst Simeon Siegel told Insider that Nordstrom Rack is also at a disadvantage to its competitors, TJ Maxx and Ross, for example, because the company operates full-price stores too.Madewell basics made an appearance.
Insider/Brittany Chang
This means that its Rack locations can be used to sell leftover inventory from full-price stores rather than inventory that's been bought at a discount, which is what TJ Maxx would do. That leads to weaker margins for Nordstrom.Women's tops.
Insider/Brittany Chang
Nordstrom's management team has addressed Rack's weakness in recent earnings calls and partly blamed this on difficulty securing inventory because of current supply chain issues.
Insider/Brittany Chang
But Siegel said it's also harder for Rack to attract brands because it has an online store. "Brands prefer the invisible sale done at TJ Maxx," he said. "If you are a brand looking to move product through off-price, seeing it online is a different proposition to believing you can drop boxes off at a TJ Maxx without anyone knowing."Nike products for sale at nordstromrack.com.
Nordstrom Rack
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