Nordstrom is focusing on expanding its off-price Nordstrom Rack chain as a key growth driver for the company. Here are the key points: Nordstrom Rack Expansion

• Nordstrom plans to accelerate new store openings for Nordstrom Rack, with 23 planned for 2024 after adding 19 in 2023.
• Rack stores are seen as a "growth engine" for Nordstrom, accounting for over 40% of new customer acquisition.
• Around a quarter of retained Rack customers migrate to the full-price Nordstrom banner within four years.
• Rack's sales grew 14.6% in Q4 2023, rebounding from an 8.1% decline in the prior year, while full-price Nordstrom sales fell 3%.

Rationale for Rack Focus

• New Rack stores deliver returns well above their cost of capital with relatively short payback periods.
• Rack enables Nordstrom to reach customers across price points and supports overall omnichannel offerings.
• Expanding Rack locations improves performance and supports services like cross-banner returns and buy online, pick up in-store.
• Rack's momentum over the 2023 holidays, driven by improved assortments and new stores, has encouraged further expansion.

However, some analysts question the aggressive Rack expansion given the banner's past underperformance relative to competitors like TJX and Ross Stores. They suggest Nordstrom should prioritize revitalizing its full-price stores to avoid further declines