Dive Brief:

• Nordstrom on Thursday reported fourth quarter net sales increases of 2.4% to $4.24 billion, from $4.14 billion in the year-ago period, though same-store sales decreased 0.9%. Q4 earnings per diluted share were $1.15, and when excluding the fourth quarter tax effect of the Trunk Club goodwill impairment, adjusted earnings were $1.37 per diluted share.

• Over the full fiscal year, Nordstrom's e-commerce sales climbed past $2.5 billion, representing approximately 25% percent of full-line sales, and its off-price Nordstrom Rack unit — now the company’s biggest source of new customers —  increased sales 11% to $4.5 billion, driven by 21 new store openings and 32% online growth. Nordstromrack.com/HauteLook sales reached $700 million, generating more than 15% of off-price sales, the company said, adding that the year’s sales reached a “record $14.5 billion” all told, aided by increased productivity.

• Nordstrom also experienced significant benefits from its expansion into Canada, where it now runs five full-line stores, including two in Toronto that opened last year. Those stores contributed $300 million in total sales, and Chief Financial Officer Michael G. Koppel told analysts Thursday that Nordstrom believes the Canadian market “represents a $1 billion opportunity consisting of six full-line stores and 15 to 20 Rack stores.”

Dive Insight:

Nordstrom remains an comparatively robust department store, racking up decent sales numbers and maintaining a reputation for appealing merchandise and superb customer service. But “racking” is also part of the problem, because the retailer’s off-price Rack stores are providing most of its fuel for sales as well as for new customers, and that trend looks to be eating into its full-line business, according to GlobalData Retail managing director Neil Saunders.

E-commerce growth is also keeping existing customers out of full-line stores, Saunders noted in an email to Retail Dive.

“Nordstrom ends is fiscal year as a company of two halves: the mainstream business, which is struggling to grow; and the off-price business which, overall, is motoring along nicely," he said. "This bifurcation is not caused by design, but rather by dynamics in the marketplace which are driving the contrasting fortunes. Of course, these two businesses do not exist in isolation, and there is an argument to be made that the expansion of an off-price concept has damaged the mainstream division. There is some evidence for this and our own data show a degree of customer sharing. However, we also hold the view that while Rack may have contributed to some of the declines seen at full-line stores, Nordstrom would be in a far worse position without it.”

Nordstrom has secured a grip on many of its expenses and gotten a handle on inventory, allowing a pullback on discounts, CFO Koppel told analysts Thursday. “In 2016, we made significant progress in improving our productivity, particularly around technology, supply chain and marketing capabilities,” he said, according to a transcript from Seeking Alpha. “Over the past five years, spending in these areas grew by 20% on average. In 2016, we were able to bend that trajectory, cutting the growth in half.”

Co-president Pete Nordstrom also told analysts that the controversy surrounding the company’s decision to forgo sales of the Ivanka Trump brand — which prompted a tweeted slam from her father, President Donald Trump and a calls for competing consumer boycotts — has had a “negligible” effect on traffic or sales, for better or worse. “I think it's not really discernible one way or the other,” Nordstrom said.