Some 120 staffers were laid off this week from the company’s tech department, as Nordstrom steps off the investment pedal in the midst of a surprisingly tough retail environment.
Nordstrom has laid off more than a hundred staffers in its technology operations as the company steps off the investment pedal in the midst of a surprisingly tough retail environment.
A person familiar with the company said 120 employees were laid off this week from the company’s tech department. The move comes in the wake of the recent cutback of 14 managers, the person said. In total the layoffs represented about 7 percent of the tech department’s staff.
Nordstrom spokeswoman Tara Darrow said the company doesn’t expect “any additional reductions” at this time in the tech team. She declined to comment on specific terminations.
Darrow said that the company has been making changes at all levels of its tech organization for the past seven months as a way to ensure its “operating model is best prepared to support our company’s future growth goals and provide us with a competitive advantage moving forward.”
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The cuts come as Nordstrom finds itself amid unexpected challenges. The Seattle retailer was until last year a Wall Street favorite because, unlike other big department stores, it started a very successful online business and a growing off-price division.
It also managed to stem the big drop-off in sales seen at rival full-price stores, from Macy’s to JC Penney.
But the troubles ailing the sector caught up with Nordstrom last year, as the company saw an unexpected slowdown in brick-and-mortar sales. That sent shares down 32 percent below their March 2015 peak, and prompted some soul searching inside the company.
Nordstrom, which wants to reach $20 billion in revenue by the end of the decade (up from $14 billion in 2015), has for the past few years invested aggressively in both beefing up its online business and in opening a new market in Canada.
The investment helped add $5 billion to Nordstrom’s top line, said Michael Koppel, the company’s chief financial officer, at a conference with investors on Wednesday.
“All these things have allowed us to create customer-facing experiences and to expand into new markets, but they’ve also put a lot of pressure on our ability to deliver earnings,” he said.
Nordstrom had previously said that its investment ramp up (which included big tech acquisitions such as The Trunk Club) would peak about 2015 and then start to moderate, rewarding patient investors with a bump in earnings. But the unexpected sales dip in 2015 “has made it more challenging,” Koppel said.
“Everything we’re doing is still resonating from a top-line standpoint, but we need to get better operationally and better figure out how this model is going to work as we go forward to achieve our goals,” he said.
Nordstrom faces another emerging challenge — more competition from Amazon.com, which is betting big on the fashion business. This week the South Lake Union-based giant launched a free daily show geared to fashion shoppers, and it is investing in private-label brands for apparel. Cowen, an equity-research firm, predicts that Amazon will surpass Macy’s as the top apparel retailer in the U.S. by next year.
“Amazon is a threat. We’ve always said that, ” Koppel acknowledged in response to a question by an analyst. “We’re hypersensitive because they live in our backyard.”
Koppel said that Nordstrom is aware of “a lot of things” going on inside Amazon. “Based on our understanding, Amazon has grown their apparel business to $10 billion relatively quickly,” he said.
E-commerce still plays a big role in Nordstrom’s future. Koppel said that by 2020 it should represent about a third of its business, up from 21 percent in 2015.