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There is a myth in America that looking good isn’t worth it.
You see it in the streets — people in their 70s walking around in t-shirts and gym shorts. You can even see it on TV, with anchors going on without ties, slowly dressing down to meet the audience.
It is this, far less than Amazon.Com (NASDAQ:AMZN), that has been killing Nordstrom (NYSE:JWN). And maybe the trend is finally ready to change.
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On Aug. 16, JWN stock managed to surprise Wall Street by earning $162 million, 95 cents per share, for the quarter ending Aug. 4, against $110 million or 66 cents per share a year ago. This beat estimates by 11 cents per share. Revenue was up 7.1% to $4.07 billion.
Why Now?
The company’s efforts at e-commerce were given much of the credit, but same-store sales rose 4%. And the results were the same across the board — at both the Nordstrom Rack discount chain and the department stores.
In some ways, this should not have been a surprise. With new homes unaffordable, consumers have been rushing to stores this summer. Walmart (NYSE:WMT) and Home Depot (NYSE:HD) both did well in the second quarter.
But with JC Penney (NYSE:JCP) and Macy’s (NYSE:M) disappointing, why was JWN stock a standout?
It’s because people who can afford quality see bargains there. I demonstrated this to my son recently, having him buy a suit jacket at a discount clothier, while I went to a Nordstrom for a suit. My suit cost less, and the service was great.
People will pay for good service. People will pay for people to help them look their best. If consumers see value, they will pay for service. Call it the Lululemon Athletica (NASDAQ:LULU) effect. That stock has more than doubled this year, with quarterly sales up 13% sequentially, thanks to great service and perceived value.
Perhaps, too, aging baby boomers whose kids are grown are tired of looking like slobs.
Why Nordstrom?
Nordstrom has been working hard for this turnaround, with careful siting of stores in high-traffic locations and an “omnichannel” strategy that includes not just in-store pickup and online delivery, but having its stylists online. Maybe it helps that this retailer is based in Seattle, home to Microsoft (NASDAQ:MSFT), Amazon and Starbucks (NASDAQ:SBUX).
People who haven’t cared about their clothing don’t know what to buy, and Nordstrom has always specialized in these customers. It was Stitch Fix (NASDAQ:SFIX) before that was a gleam in founder Katrina Lake’s eye.