(JWN) Nordstrom Expands Store Network

Nordstrom Inc. (JWN), a leading fashion specialty retailer in the United States, announced the opening of two new Nordstrom Rack stores; one in Huntington, New York, and the other in Upland, California.

The New York store at the Huntington Shopping Center in the Long Island community of Huntington is expected to begin operation by fall 2012. The showroom spread out in an area of 36,000 square feet will offer both branded and private label merchandise. Other retailers doing business in the Huntington mall include Bed Bath & Beyond Inc. (BBBY), Buy Buy Baby, Michaels, PetSmart Inc. (PETM) and Toys “R” Us.

Nordstrom’s new California store is expected to come up at Colonies Crossroads, a large multi-phased power center, housing retailers like TJMaxx, Toys “R” Us, Target Corp. (TGT), Kohl’s Corp. (KSS), Dick’s Sporting Goods Inc. (DKS), Home Depot Inc. (HD), LA Fitness and Albertsons. The company expects to start operating the 35,000 square foot showroom by spring 2013.

Nordstrom’s Nordstrom Rack stores generally offer on-trend merchandise from Nordstrom stores and Nordstrom.com at significant cost savings to customers. Products at these stores are sold with discounts of about 50% to 60% from the original Nordstrom tags. Nordstrom Rack also carries a vast assortment of branded apparel, accessories and shoes that are available at Nordstrom stores, offered to customers with savings of about 30% to 70%.

Nordstrom’s latest store openings signify the company’s commitment to expanding its store network with the aim to drive top-line growth. The company’s focus on store expansion was also evident from the opening of two new Nordstrom Rack stores in the month of March 2012 – one in Orange, California and the other in Salt Lake City, Utah.

In fiscal 2011, Nordstrom added 18 new stores which contributed significantly to a 12.7% year-over-year growth in fiscal 2011 net sales. Moreover, Nordstrom plans to continue its store expansion strategy in fiscal 2012 targeting to open a total of 16 new stores, comprising 1 full-line store and 15 Rack stores.

Nordstrom offers a broad array of over 500 brands, targeted toward the whole family, through a strong nationwide network of 226 stores situated across 30 states. The company’s strong line up of globally known brands acts as a competitive advantage for Nordstrom while bolstering its well-established position in the market.

However, intense competition from other established players and exposure to seasonal fluctuations may undermine the company’s future growth prospects. Currently, Nordstrom maintains a Zacks #3 Rank, which translates into a short-term Hold rating. Our long-term recommendation on the stock remains Neutral.

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