Dive Brief:

• Nordstom is further optimizing its supply chain as one of three priorities it outlined to improve its financial performance over the next fiscal year, executives said on an earnings call this month.
• Already, the retailer has moved to improve unit flow from suppliers to customers, including by changing ordering practices and partnering with suppliers on shipment standards, President and Chief Brand Officer Pete Nordstrom said. It has also seen improved productivity and throughput at its facilities due in part to prioritizing employee retention.
• Nordstrom expects building on these efforts will benefit its business in 2023, after Q4 net sales fell 4.1% year over year. "These actions will continue to improve the customer experience, increase sell-through and reduce markdowns by allowing us to place the right assortment with the right depth closer to the customer,” he noted on the call.

Dive Insight:

Boosting supply chain efficiencies is an essential piece of Nordstrom's "Closer to You" strategy, Pete Nordstrom said. Part of this effort includes connecting the company’s store and supply chain inventory in individual markets to increase product availability while reducing shipping speeds, with customers being able to receive the order in a variety of locations.

"For example, one in five nordstrom.com ‘buy online, pick up in store’ orders are actually picked up at our Rack stores after we launched this service just three years ago," Pete Nordstrom said.

But advancing optimization in its supply chain is just one of Nordstrom’s three priorities to improve its bottom line in 2023.

The second is to increase inventory productivity. CEO Erik Nordstrom noted on the call that as supply chains have stabilized, the company can readjust to pre-pandemic norms of inventory management after weathering issues related to stock levels, receipt flows and more. Bloated inventories were a challenge for many retailers throughout 2022.

The third priority is improving Nordstrom Rack's performance. Nordstrom Rack's sales declined 8.1% year over year in Q4. The company estimates more than half of that decrease was tied to cutting store-based order fulfillment and raising the minimum order amount to receive free ship-to-store delivery on Nordstrom Rack's website, Erik Nordstrom said.

"These actions reduced order cancellations, simplified Rack operations and improved profitability, but negatively impacted top line growth at the Rack," Erik Nordstrom added.