Nordstrom Grabs Market Share

Narrow-moat

We are encouraged by Nordstrom's ability to continue to take market share given the year-to-date 0.1% average increase in department store sales versus Nordstrom's 2.4% fiscal year-to-date increase, supporting our thesis that Nordstrom has a brand intangible asset, which underlies our narrow moat rating. We believe the modest increase in merchandise margin, which supported gross margin expansion by 91 basis points (now 35%) is further evidence that the company has modest pricing power from its brand equity, driving the net sales increase of 7% in the period. Furthermore, slightly decreasing inventory levels highlight the success and synergies Nordstrom has cultivated between their full-price and off-price segments. These segments allow the firm to quickly turn inventory while not discounting strategic brands (now 45% of full price sales) which further strengthens their relationships with brand partners.

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